EXHIBIT 3(a)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)RESTATED CERTIFICATE OF INCORPORATION
OF
AIRBORNE, INC.
FIRST. 1.1 The name of the Securities Exchange Actcorporation is
AIRBORNE, INC.
SECOND. 2.1 The address of 1934
For the fiscal year ended Commission file number
December 31, 1996 1-6512
----------------------------------
AIRBORNE FREIGHT CORPORATION
(Exactits registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington,
County of New Castle. The name of registrant as specified in its charter)
Delaware 91-0837469
(State of Incorporation) (I.R.S. Employer Identification No.)
Airborne Freightregistered agent at such
address is The Prentice-Hall Corporation 3101 Western Avenue
P.O. Box 662
Seattle, WA 98111
(Address of principal executive offices)
Registrant's telephone number including area code: 206-285-4600
Securities registered pursuant to Section 12(b)System, Inc.
THIRD. 3.1 The nature of the Act:
Name of each Exchange
Title of each class on which Registered
------------------- -------------------
Common Stock, Par Value New York Stock Exchange
$1.00 per share Pacific Stock Exchange
6 3/4% Convertible Subordinated New York Stock Exchange
Debentures Due August 15, 2001
Rights to Purchase Series A New York Stock Exchange
Participating Cumulative Pacific Stock Exchangebusiness or purposes to be
conducted or promoted is:
3.1.1 To transport intrastate,
interstate, and/or foreign commerce by aircraft, motor, rail,
water vehicle and/or other means of transportation, passengers,
freight, securities and articles of merchandise of every nature
and description, either directly, indirectly or as agent or
principal; to engage in and carry on the business of receiving,
carrying, transporting, and delivering for compensation,
passengers, baggage, goods, wares, mail matter, packages,
freight, and merchandise of every kind and description, to, from
and between airports, air terminals, railroad stations,
terminals, or wharves, and to, from and between any other places
whatsoever, by fixed routes or otherwise either public, quasi-
public, or private; to engage in and carry on a general shipping
and forwarding business, a general transfer, express and baggage
business; to engage in and carry on a general taxi business; to
engage in and carry on a general trucking, contracting, cooperage
and stevedore business, to engage in and carry on a general
brokerage, factoring and import-export business; and to contract
with air carriers, railroads, warehouses, water carriers, motor
carriers and transportation lines or carriers of every kind, as
well as with corporation, copartnerships, business concerns of
every kind, individuals, and the public in general, covering,
relating, or incidental to any of the foregoing purposes.
3.1.2 It is the purpose of this
corporation to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law
of Delaware and none of the above-stated purposes shall be or be
deemed to be in limitation of such general purposes.
FOURTH. 4.1 The total number of shares of all classes of
capital stock which the corporation shall have authority to issue
is one hundred twenty-six million (126,000,000), of which six
million (6,000,000) shares shall be Preferred Stock,
Securities registered pursuantwithout par
value, issuable in one or more series, and one hundred twenty
million (120,000,000) shares shall be Common Stock, par value One
Dollar ($1.00) per share, amounting in the aggregate to Section 12(g)One
Hundred Twenty Million Dollars ($120,000,000).
4.2 The Board of Directors is hereby expressly
authorized, at any time or from time to time, to divide any or
all of the Act:
NONE
Indicateshares of Preferred Stock into one or more series, and
in the resolution or resolutions establishing a particular
series, before issuance of any of the shares thereof, to fix and
determine the number of shares and the designation of such
series, so as to distinguish it from the shares of all other
series and classes, and to fix and determine the preferences,
voting rights, qualifications, privileges, limitations, options,
conversion rights, restrictions and other special or relative
rights of the Preferred Stock or of such series to the fullest
extent now or hereafter permitted by check mark whether the registrant (1) has filed all
reports requiredlaws of the State of
Delaware, including, but not limited to, the variations between
different series in the following respects:
4.2.1 The distinctive designation of such
series and the number of shares which shall constitute such
series, which number may be increased or decreased (but not below
the number of shares thereof then outstanding) from time to time
by the Board of Directors;
4.2.2 The annual dividend rate for such
series, and the date or dates from which dividends shall commence
to accrue;
4.2.3 The price or prices at which, and
the terms and conditions on which, the shares of such series may
be made redeemable;
4.2.4 The purchase or sinking fund
provisions, if any, for the purchase or redemption of shares of
such series;
4.2.5 The preferential amount or amounts
payable upon shares of such series in the event of the
liquidation, dissolution or winding up of the corporation;
4.2.6 The voting rights, if any, of
shares of such series;
4.2.7 The terms and conditions, if any,
upon which shares of such series may be converted and the class
or classes or series of shares of the corporation or other
securities into which such shares may be converted;
4.2.8 The relative seniority, parity or
junior rank of such series as to dividends or assets with respect
to any other classes or series of stock then or thereafter to be
filed by Section 13issued; and
4.2.9 Such other terms, qualifications,
privileges, limitations, options, restrictions, and special or
15(d)relative rights and preferences, if any, of shares of such series
as the Board of Directors may, at the time of such resolution or
resolutions, lawfully fix and determine under the laws of the
Securities
Exchange ActState of 1934 duringDelaware.
Unless otherwise provided in a resolution or
resolutions establishing any particular series, the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicateaggregate
number of authorized shares of Preferred Stock may be increased
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 anyan amendment to this Form 10-K.(X)
As of February 24, 1997, 21,308,812 shares (net of 315,150 treasury
shares) of the registrant's Common Stock were outstanding and the aggregate
market valueCertificate of Incorporation approved
solely by a majority vote of the voting stock held by non-affiliates of the registrant
(based on the closing price on that date on the New York Stock Exchange)
was approximately $600,367,932.(1)
Documents Incorporated by Reference
Portions of the 1996 Annual Report to Shareholders are incorporated by
reference into Part I and Part II.
Portions of the Proxy Statement for the 1997 Annual Meeting of
Shareholders to be held April 22, 1997 are incorporated by reference into
Part III.
(1) Excludes value ofoutstanding shares of Common
Stock held of record by non-
employee directors and executive officers at February 24, 1997.
Includes shares held by certain depository organizations. Exclusion
of shares held by any person should not be construed to indicate that
such person possesses the power, direct or indirect, to direct or
cause the direction of the management or policies of the registrant,
or that such person is controlled by or is under common control(or solely with the registrant.
AIRBORNE FREIGHT CORPORATION
1996 FORM 10-K ANNUAL REPORT
Table of Contents
Page
----
Part I
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 4a. Executive Officers of the Registrant 9
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 11
Part III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners
and Management 12
Item 13. Certain Relationships and Related Transactions 12
Part IV
Item 14. Exhibits, Financial Statement Schedules, and 13
Reports on Form 8-K
PART I
ITEM 1. BUSINESS
- - ------------------
a) General Development of Business
-------------------------------
Airborne Freight Corporation (herein referred to as "Airborne Express"
or the "Company", which reference shall include its subsidiaries and their
assets and operations, unless the context clearly indicates otherwise) was
incorporated in Delaware on May 10, 1968. The Company is an air express
company and air freight forwarder that expedites shipments of all sizes to
destinations throughout the United States and most foreign countries.
The Company holds a certificate of registration issued by the United
States Patent and Trademark Office for the service mark AIRBORNE EXPRESS.
Most public presentation of the Company carries this name. The purpose of
using this trade name is to more clearly communicate to the market place
the primary nature of the business of the Company.
ABX Air, Inc., the Company's principal wholly-owned subsidiary (herein
referred to as "ABX"), was incorporated in Delaware on January 22, 1980.
ABX provides domestic express cargo service and cargo service to Canada.
The Company is the sole customer of ABX for this service. ABX also offers
limited charter service.
In 1996, the Company commemorated its first 50 years of service.
Founded in 1946 in San Francisco, Airborne Flower Association of California
began as a transporter of fresh flowers from Hawaii and California to East
Coast markets. As Airborne Flower grew and offered other expanded service
options and capabilities, it changed its name in 1956 to Airborne Freight
Corporation. In 1968, the Company was formed when its predecessor
consolidated with Pacific Air Freight, a freight forwarder founded in
Seattle in 1949, to transport perishables to Alaska. The Company retained
the name Airborne Freight Corporation. The Company is proud of its 50
years of successes and looks forward to the future.
b) Financial Information about Industry Segments
---------------------------------------------
None
c) Narrative Description of Business
---------------------------------
Airborne Express provides door-to-door express delivery of small
packages and documents throughout the United States and to and from most
foreign countries. The Company also acts as an international and domestic
freight forwarder for shipments of any size. The Company's strategy is to
be the low cost provider of express services for high volume corporate
customers.
Domestic Operations
- - -------------------
The Company's domestic operations, supported by approximately 280
facilities, primarily involve express door-to-door delivery of shipments
weighing less than 100 pounds. Shipments consist primarily of business
documents and other printed matter, electronic and computer parts,
software, machine parts, health care items, films and videotapes, and other
items for which speed and reliability of delivery are important.
The Company's primary service is its overnight express product. This
product, which comprised approximately 58% of the Company's domestic
shipments during 1996, generally provides for before noon delivery on the
next business day to most metropolitan cities in the United States. The
Company also provides Saturday and holiday pickup and delivery service for
most cities.
-1-
Beginning in 1995 and continuing into 1996, the Company redefined its
deferred service product through the creation of two distinct levels of
service. The services, Next Afternoon Service (NAS) and Second Day Service
(SDS) replaced Select Delivery Service, which had been the Company's
deferred service product since 1990. NAS is available for shipments
weighing five pounds or less and SDS is offered for shipments of all
weights. Select Delivery Service provided next afternoon service for
shipments weighing five pounds or less, with shipments weighing more than
five pounds delivered on a second day basis. Deferred service shipments,
which comprised approximately 42% of domestic shipments during 1996, are
lower priced than the overnight express product reflecting the less time
sensitive nature of the shipments. NAS rates are generally higher than SDS
rates.
While the Company's domestic airline system is designed primarily to
handle express shipments, any available capacity is also utilized to carry
shipments which the Company would normally move on other carriers in its
role as an air freight forwarder.
Communications System
- - ---------------------
FOCUS (Freight On-line Control and Update System) is a proprietary
communications system which provides real time information for purposes of
tracking and providing the status of customer's shipments as well as
monitoring the performance of the Company's operational systems. The
Company's facilities and international agents are linked to FOCUS and
provide inputs to the system, in part through the driver's use of hand-held
scanners which read bar-codes on the shipping documents, with information
necessary to determine the status and location of customer shipments 24
hours a day. FOCUS allows for direct customer access to shipment
information through the use of their own computer systems.
FOCUS provides the Company's personnel with important information for
use in coordinating its operational activities. Information regarding
Company-operated aircraft arrivals and departures, weather, and
documentation requirements for shipments destined to foreign locations are
several examples of the information maintained and provided by FOCUS.
Pickup and Delivery
- - -------------------
The Company accomplishes its door-to-door pickup and delivery service
using approximately 13,300 radio-dispatched delivery vans and trucks, of
which approximately 5,100 are owned by the Company. Independent
contractors under contract with the Company provide the balance of the
pickup and delivery services.
Because convenience is an important factor in attracting business from
less frequent shippers, the Company has an ongoing program to place drop
boxes in convenient locations. The Company has approximately 11,100 boxes
in service.
Sort Facilities
- - ---------------
The Company's main sort center is located in Wilmington, Ohio. As
express delivery volume has increased, the main sort center has been
expanded. In 1995, the sort center was expanded and currently has the
capacity to handle approximately 980,000 pieces during the primary 2-1/2
hour nightly sort operation. On average, approximately 835,000 pieces were
sorted each weekday night at the sort center during the fourth quarter of
1996.
In addition to the main sort facility at Wilmington, ten regional hub
facilities have been established primarily to sort shipments originating
and having a destination within approximately a 300 mile radius of a
regional hub.
The Company also conducts a day sort operation at Wilmington which
services SDS shipments. The day sort receives shipments weighing five
pounds or less from flights
-2-
arriving during the previous night sort operation. Shipments weighing more
than five pounds are either trucked or flown to the day sort from the
regional hub facilities.
The operation of the Wilmington facility is critical to the Company's
business. The inability to use the Wilmington airport, because of bad
weather or other factors, would have a serious adverse effect on the
Company's service. However, contingency plans, including landing at nearby
airports and transporting packages to and from the sort center by truck,
can be implemented to address, in part, temporary inaccessibility of the
Wilmington airport.
In the fourth quarter of 1996, approximately 54% and 19% of total
shipment weight was handled through the night sort and day sort operations
at Wilmington, respectively, with the remaining 27% being handled
exclusively by the regional hubs.
Shipment Routing
- - ----------------
The logistics of moving a shipment from its origin to destination is
determined by several factors. Shipments are routed differently depending
on shipment product type, weight, geographic distances between origin and
destination, and locations of Company stations relative to the locations of
sort facilities. Shipments generally are moved between stations and sort
facilities on either Company aircraft or contracted trucks. A limited
number of shipments are transported airport-to-airport on commercial air
carriers.
Overnight express shipments, NAS shipments and SDS shipments weighing
five pounds or less are picked up by local stations and generally
consolidated with other stations' shipments at Company airport facilities.
Shipments that are not serviced through regional hubs are loaded on Company
aircraft departing each weekday evening from various points within the
United States and Canada. These aircraft may stop at other airports to
permit additional locations and feeder aircraft to consolidate their cargo
onto the larger aircraft before completing the flight to the Wilmington
hub. The aircraft are scheduled to arrive at Wilmington between
approximately 11:30 p.m. and 3:00 a.m. at which time the shipments are
sorted and reloaded. The aircraft are scheduled to depart before 6:00 a.m.
and return to their applicable destinations in time to complete scheduled
next business morning or deferred service commitments. The Wilmington hub
also receives shipments via truck from selected stations in the vicinity of
the Wilmington hub for integration with the nightly sort process.
For the day sort operation, handling SDS shipments weighing over five
pounds, generally 12 aircraft return to Wilmington from overnight service
destinations on Tuesday through Thursday. These aircraft, and trucks from
six regional hubs, arrive at Wilmington between 10:00 a.m. and 2:00 p.m., at
which time shipments are sorted and reloaded on the aircraft or trucks by
3:30 p.m. for departure and return to their respective destinations.
The Company also performs weekend sort operations at Wilmington to
accommodate Saturday pickups and Monday deliveries of both overnight
express and deferred service shipments. This sort is supported by 14
Company aircraft and by trucks.
Aircraft
- - --------
The Company currently utilizes used aircraft manufactured in the late
1960s and early 1970s. Upon acquisition, the aircraft are modified by the
Company. At the end of 1996, the Company's in-service fleet consisted of a
total of 110 aircraft, including 35 McDonnell Douglas DC-8s (consisting of
13 series 61, 6 series 62 and 16 series 63), 66 DC-9s (consisting of 2
series 10, 43 series 30 and 21 series 40), and 9 YS-11 turboprop aircraft.
The Company owns the majority of the aircraft it operates, but has
completed sale-leaseback transactions with respect to six DC-8 and six DC-9
aircraft. In addition, approximately 65 smaller aircraft are chartered
nightly to connect small cities with Company aircraft that then operate to
and from Wilmington.
-3-
In December 1995, the Company announced an agreement to purchase 12
used Boeing 767-200's between the years 1997 and 2000 and its plans to
pursue the acquisition of 10 to 15 additional used 767-200's between the
years 2000 and 2004. This newer generation of aircraft should increase
operating efficiency and allow the Company to meet anticipated demand for
additional lift capacity. There are no plans to retire any aircraft as a
result of these acquisitions, although retirement is an option if shipment
growth does not require the added capacity.
At year end 1996, the nightly lift capacity of the system was about
3.8 million pounds versus approximately 3.5 million pounds and 3.1 million
pounds at the end of 1995 and 1994, respectively. During 1996, the
Company's utilization of available lift capacity approximated 74%.
In response to increased public awareness regarding the operation of
older aircraft, the Federal Aviation Administration ("FAA") periodically
mandates additional maintenance requirements for certain aircraft,
including the type operated by the Company. In recent years, the Company
has completed, and continues to perform, a number of inspection and
maintenance programs pertaining to various Airworthiness Directives issued
by the FAA. The FAA could, in the future, impose additional maintenance
requirements for aircraft and engines of the type operated by the Company
or interpret existing rules in a manner which could have a material effect
on the Company's operations and financial position.
In accordance with federal law and FAA regulations, only subsonic
turbojet aircraft classified as Stage 2 or 3 by the FAA may be operated in
the United States. Generally, Stage 3 aircraft produce less noise than a
comparable Stage 2 aircraft.
In 1990, Congress passed the Airport Noise and Capacity Act of 1990
(the "Noise Act"). Among other things, the Noise Act generally requires
turbojet aircraft weighing in excess of 75,000 pounds and operating in the
United States (the type of DC-8 and DC-9 aircraft operated by the Company)
to comply with Stage 3 noise emission standards on or before December 31,
1999. The Company's YS-11 turboprop aircraft are not subject to these
requirements. In accordance with the Noise Act, the FAA has issued
regulations establishing interim compliance deadlines. These rules
required air carriers to reduce the base level of Stage 2 aircraft they
operate 50% by December 31, 1996; and 75% by December 31, 1998. As of
December 31, 1996, the Company has complied with interim compliance
deadline and expects to meet or exceed the December 31, 1998 interim
compliance deadline. As of December 31, 1996, 61% of the Company's
turbojet aircraft (25 DC-8 and 37 DC-9 aircraft) were Stage 3 aircraft, the
balance being Stage 2 aircraft. In addition to FAA regulation, certain
local airports also regulate noise compliance. See "Business -
Regulation".
The Company, in conjunction with several other companies, has
developed noise suppression technology known as hush kits for its DC-9
series aircraft which have been certified to meet FAA Stage 3 requirements.
The capital cost for Stage 3 hush kits is approximately $1.4 million for
each DC-9 series aircraft. The Company has installed hush kits which
satisfy Stage 3 compliance requirements on all of its DC-8-62 and DC-8-63
series aircraft and three of its DC-8-61 series aircraft. The capital cost
to modify the Company's remaining DC-8-61 aircraft to meet Stage 3 noise
standards is approximately $5.7 million per aircraft.
International Operations
- - ------------------------
The Company provides international express door-to-door delivery and a
variety of freight services. These services are provided in most foreign
countries on an inbound and outbound basis through a network of Airborne
offices and independent agents. Most international deliveries are
accomplished within 24 to 96 hours of pickup.
The Company's domestic stations are staffed and equipped to handle
international shipments to or from almost anywhere in the world. In
addition to its extensive domestic network, the Company operates its own
offices in the Far East, Australia, New Zealand, and
-4-
the United Kingdom. The Company's freight and express agents worldwide are
connected to FOCUS, Airborne's on-line communication network, through which
the Company can provide its customers with immediate access to the status
of shipments almost anywhere in the world.
The Company's international air express service is intended for the
movement of non dutiable and certain dutiable shipments weighing less than
99 pounds. The Company's international air freight service handles heavier
weight shipments on either an airport-to-airport, door-to-airport or door-
to-door basis. The Company also offers ocean service capabilities for
customers who want a lower cost shipping option.
The Company's strategy is to use a variable-cost approach in
delivering and expanding international services to its customers. This
strategy uses existing commercial airline lift capacity in connection with
the Company's domestic network to move shipments to and from overseas
destinations and origins. Additionally, service arrangements with
independent freight and express agents have been entered into to
accommodate shipments in locations not currently served by Company-owned
operations. The Company currently believes there are no significant
service advantages which would justify the operation of its own aircraft on
international routes, or making significant investment in additional
offshore facilities or ground operations. In order to expand its business
at a reasonable cost, the Company continues to explore possible joint
venture agreements which combine the Company's management expertise,
domestic express system and information systems with local business
knowledge and market reputation of suitable partners. Joint ventures have
been formed in Japan, Thailand, Malaysia, the Netherlands, and South
Africa.
Customers and Marketing
- - -----------------------
The Company's primary domestic strategy focuses on express services
for high volume corporate customers. Most high volume customers have
entered into service agreements providing for specified rates or rate
schedules for express deliveries. As of December 31, 1996, the Company
serviced approximately 460,000 active customer shipping locations.
The Company determines prices for any particular domestic express
customer based on competitive factors, anticipated costs, shipment volume
and weight, and other considerations. The Company believes that it
generally offers prices that are competitive with, or lower than, prices
quoted by its principal competitors for comparable services.
Internationally, the Company's marketing strategy is to target the
outbound express and freight shipments of U.S. corporate customers, and to
sell the inbound service of the Company's distribution capabilities in the
United States.
Both in the international and domestic markets, the Company believes
that its customers are most effectively reached by a direct sales force
and, accordingly, does not currently engage in mass media advertising.
Domestic sales representatives are responsible for selling both domestic
and international express shipments. In addition, the International
Division has its own dedicated direct sales organization for selling
international freight service.
The Company's sales force currently consists of approximately 300
domestic representatives and approximately 80 international specialists.
The Company's sales efforts are supported by the Marketing and
International Divisions, based at the Company headquarters. Senior
management is also active in marketing the Company's services to major
accounts.
Value-added services continue to be important factors in attracting
and retaining customers. Accordingly, the Company is automating more of
its operations to make the service easier for customers to use and to
provide them with valuable management information. The Company believes
that it is generally competitive with other express carriers in terms of
reliability, value-added services and convenience.
-5-
For many of its high volume customers, the Company offers a metering
device, called LIBRA II, which is installed at the customer's place of
business. With minimum data entry, the metering device weighs the package,
calculates the shipping charges, generates the shipping labels and provides
a daily shipping report. At year end 1996, the system was in use at
approximately 9,300 domestic customer locations and 900 international
customer locations. Use of LIBRA II not only benefits the customer
directly, but also lowers the Company's operating costs, since LIBRA II
shipment data is transferred into the Airborne FOCUS shipment tracking
system automatically, thus avoiding duplicate data entry.
"Customer Linkage", an electronic data interchange ("EDI") program
developed for Airborne's highest volume shippers, allows customers, with
their computers, to create shipping documentation at the same time they are
entering orders for their goods. At the end of each day, shipping
activities are transmitted electronically to the Airborne FOCUS system
where information is captured for shipment tracking and billing purposes.
Customer Linkage benefits the customer by eliminating repetitive data entry
and paperwork and also lowers the Company's operating costs by eliminating
manual data entry. EDI also includes electronic invoicing and payment
remittance processing. The Company also has available a software program
known as Quicklink, which significantly reduces programming time required
by customers to take advantage of linkage benefits.
In 1995, the Company unveiled "LIGHTSHIP TRACKER", a PC-based tracking
software, which was the first in a series of software products designed to
improve customer productivity and provide convenient access to the
Company's various services. LIGHTSHIP TRACKER allows customers, working
from their PCs, to view the status of and receive information regarding
their shipments through access to the Airborne FOCUS system.
In 1997, the Company will provide customers with additional
flexibility and productivity opportunities through the introduction of its
PC-based software program, "LIGHTSHIP SHIPPER". Through personal or office
computers via modem connection to the Airborne FOCUS system, customers will
be able to obtain estimated shipping rates and delivery times, fill out and
print shipping labels, schedule pickups, as well as track the status of
their shipments.
The Company offers a number of special logistics programs to customers
through Airborne Logistics Services ("ALS"), a division of ABX Air, Inc.
ALS operates the Company's Stock Exchange and Hub Warehousing and other
logistics programs. These programs provide customers the ability to
maintain inventories which can be managed either by Company or customer
personnel. Items inventoried at Wilmington can be delivered utilizing
either the Company's airline system or, if required, commercial airlines on
a next-flight-out basis. ALS' Central Print program allows information to
be sent electronically to customer computers located at Wilmington where
Company personnel monitor printed output and ship the material according to
customer instructions.
In addition, the Company's Sky Courier business provides expedited
next-plane-out service at premium prices. Sky Courier also offers a
Regional Warehousing program where customer inventories are managed at any
of over 60 locations around the United States and Canada.
The Company has obtained ISO 9000 certification for its Chicago,
Philadelphia and London stations and its Seattle Headquarters. ISO 9000 is
a program developed by the International Standards Organization ("ISO"),
based in Geneva, Switzerland. This organization provides a set of
international standards on quality management and quality assurance
presently recognized in over 90 countries. The certification is an asset
in doing business worldwide and provides evidence of the Company's
commitment to excellence and quality.
-6-
Competition
- - -----------
The market for the Company's services has been and is expected to
remain highly competitive. The principal competitive factors in both
domestic and international markets are price, the ability to provide
reliable pickup and delivery, and value-added services.
Federal Express continues to be the dominant competitor in the
domestic express business, followed by United Parcel Service. Airborne
Express ranks third in shipment volume behind these two companies in the
domestic express business. Other domestic express competitors include the
U.S. Postal Service's Express Mail Service and several other transportation
companies offering next morning or next-plane-out delivery service. The
Company also competes to some extent with companies offering ground
transportation services and with facsimile and other forms of electronic
transmission.
The Company believes it is important to maintain an active capital
expansion program to increase capacity, improve service and increase
productivity as its volume of shipments increases. However, the Company
has significantly less capital resources than its two primary competitors.
In the international markets, in addition to Federal Express and
United Parcel Service, the Company competes with DHL, TNT and other air
freight forwarders or carriers and most commercial airlines.
Employees
- - ---------
As of December 31, 1996, the Company and its subsidiaries had
approximately 12,700 full-time employees and 8,000 part-time and casual
employees. Approximately 6,000 full-time employees (including the
Company's 715 pilots) and 3,200 part-time and casual employees are employed
under union contracts, primarily with locals of the International
Brotherhood of Teamsters and Warehousemen.
Labor Agreements
- - ----------------
Most labor agreements covering the Company's ground personnel are for
a four-year term expiring in 1998. The Company's pilots are covered by a
contract which became amendable on July 31, 1995. The Company has not
experienced any significant disruption from labor disputes in the past.
However, negotiations with the pilots are in mediation, and the Company
cannot predict whether the contract with the pilots will be amended without
experiencing any work disruption.
Subsidiaries
- - ------------
The Company has the following wholly-owned subsidiaries:
1. ABX Air, Inc., a Delaware corporation, is a certificated air
carrier which owns and operates the Company's domestic express
cargo service. Its wholly-owned subsidiaries are as follows:
a) Wilmington Air Park, Inc., an Ohio corporation, is the owner
of the Wilmington airport property (Airborne Air Park).
b) Airborne FTZ, Inc., an Ohio corporation, is the holder of a
foreign trade zone certificate at the Wilmington airport
property and owns and manages the Company's expendable
aircraft parts inventory.
c) Aviation Fuel, Inc., an Ohio corporation, purchases and
sells aviation and other fuels.
-7-
d) Advanced Logistics Services Corp., an Ohio corporation,
provided customized warehousing, inventory management and
shipping services, through late 1996. Logistics services
are currently provided by Airborne Logistic Services, a
division of ABX Air, Inc.
e) Sound Suppression, Inc., an Ohio corporation with no
current operating activities.
2. Awawego Delivery, Inc., a New York corporation, holds trucking
rights in New York and Connecticut.
3. Airborne Forwarding Corporation, a Delaware corporation doing
business as Sky Courier, provides expedited courier service.
4. Airborne Freight Limited, a New Zealand corporation, provides
air express and air freight services.
Regulation
- - ----------
The Company's operations are regulated by the United States Department
of Transportation ("DOT"), the FAA, and various other federal, state, local
and foreign authorities.
The DOT, under federal transportation statutes, grants air carriers
the right to engage in domestic and international air transportation. The
DOT issues certificates to engage in air transportation and has the
authority to modify, suspend or revoke such certificates for cause,
including failure to comply with federal law or the DOT regulations. The
Company believes it possesses all necessary DOT-issued certificates to
conduct its operations.
The FAA regulates aircraft safety and flight operations generally,
including equipment, ground facilities, maintenance, security procedures,
and communications. The FAA issues operating certificates to carriers who
possess the technical competence to conduct air carrier operations. In
addition, the FAA issues certificates of airworthiness to each aircraft
which meets the requirements for aircraft design and maintenance. The
Company believes it holds all airworthiness and other FAA certificates
required for the conduct of its business, although the FAA has the power to
suspend or revoke such certificates for cause, including failure to comply
with federal law.
The federal government generally regulates aircraft engine noise at
its source. However, local airport operators may, under certain
circumstances, regulate airport operations based on aircraft noise
considerations. The Noise Act provides that in the case of Stage 2
aircraft restrictions, the airport operator must notify air carriers of its
intention to propose rules and satisfy the requirements of federal statutes
before implementation of the rules or in the case of Stage 3 aircraft, the
airport operator must obtain the carriers' or the governments' approval of
the rule prior to its adoption. The Company believes the operation of its
aircraft either complies with or is exempt from compliance with currently
applicable local airport rules. However, if more stringent aircraft
operating regulations were adopted on a widespread basis, the Company might
be required to expend substantial sums, make schedule changes or take other
actions.
The Company's aircraft currently meet all known requirements for
emission levels. However, under the Clean Air Act, individual states or
the Federal Environmental Protection Agency (the "EPA") may adopt
regulations requiring the reduction in emissions for one or more localities
based on the measured air quality at such localities. The EPA has proposed
regulations for portions of California calling for emission reductions
through restricting the use of emission producing ground service equipment
or aircraft auxiliary power units. There can be no assurance, that if such
regulations are adopted in the future or changes in existing laws or
regulations are promulgated, such laws or rules would not have a material
adverse effect on the Company.
-8-
Under currently applicable federal aviation law, the Company's airline
subsidiary could cease to be eligible to operate as an all-cargo carrier if
more than 25% of the voting stock of the Company were owned or controlled
by non-U.S. citizens or the airline were not effectively controlled by U.S.
citizens. Moreover, in order to hold an all-cargo air carrier certificate,
the president and at least two-thirds of the directors and officers of an
air carrier must be U.S. citizens. To the best of the Company's knowledge,
foreign stockholders do not control more than 25% of the outstanding voting
stock. Two of the Company's 42 officers are not U.S. citizens.
The Company believes that its current operations are substantially in
compliance with the numerous regulations to which its business is subject;
however, various regulatory authorities have jurisdiction over significant
aspects of the Company's business, and it is possible that new laws or
regulations or changes in existing laws or regulations or the
interpretations thereof could have a material adverse effect on the
Company's operations.
Financial Information Regarding International and Domestic Operations
- - ---------------------------------------------------------------------
Financial information relating to foreign and domestic operations for
each of the three years in the period ended December 31, 1996 is presented
in Note J (Segment Information) of the Notes to Consolidated Financial
Statements appearing in the 1996 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 2. PROPERTIES
- - --------------------
The Company leases general and administrative office facilities
located in Seattle, Washington.
At year end the Company maintained approximately 280 domestic and 40
foreign stations, most of which are leased. The majority of the facilities
are located at or near airports.
The Company owns the airport at the Airborne Air Park, in Wilmington,
Ohio. The airport currently consists of two runways, taxi-ways, aprons,
buildings serving as aircraft and equipment maintenance facilities, sort
facilities, storage facilities, a training center, and operations and
administrative offices.
The Company believes its existing facilities are adequate to meet
current needs.
Information regarding collateralization of certain property and lease
commitments of the Company is set forth in Notes E and F of the Notes to
Consolidated Financial Statements appearing in the 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
- - ---------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - -------------------------------------------------------------
None
-9-
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
- - ----------------------------------------------
Positions and Offices Presently
Name Age Held and Business Experience
- - ---- --- ----------------------------
Robert S. Cline 59 Chairman and Chief Executive Officer (1984
to date); Vice Chairman and Chief Financial
Officer (1978 to 1984); Executive Vice
President and Chief Financial Officer (1973
to 1978); Senior Vice President, Finance
(1970 to 1973); Vice President, Finance
(1968 to 1970); Vice President, Finance,
Pacific Air Freight, Inc. (1966 to 1968)
Robert G. Brazier 59 President and Chief Operating Officer (1978
to date); Executive Vice President and
Chief Operating Officer (1973 to 1978);
Senior Vice President, Operations (1970 to
1973); Vice President, Operations (1968 to
1970); Vice President, Sales and
Operations, Pacific Air Freight, Inc. (1964
to 1968)
Roy C. Liljebeck 59 Chief Financial Officer (1984 to date);
Executive Vice President, Finance Division
(1979 to date); Senior Vice President (1973
to 1979); Treasurer (1968 to 1988)
Kent W. Freudenberger 56 Executive Vice President, Marketing
Division (1980 to date); Senior Vice
President (1978 to 1980); Vice President
(1973 to 1978)
Raymond T. Van Bruwaene 58 Executive Vice President, Field Services
Division (1980 to date); Senior Vice
President (1978 to 1980); Vice President
(1973 to 1978)
John J. Cella 56 Executive Vice President, International
Division (1985 to date); Senior Vice
President, International Division (1982 to
1985); Vice President, International Divi
sion (1981 to 1982); Vice President, Far
East (1971 to 1981)
Carl D. Donaway 45 President and Chief Executive Officer, ABX
Air, Inc. (1992 to date); offices held in
the Company: Vice President, Business
Analysis (1992); Vice President, Customer
Support (1990 to 1992); Director, Customer
Support (1988 to 1990)
-10-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- - ---------------------------------------------------------------
STOCKHOLDERS MATTERS
- - --------------------
The response to this Item is contained in the 1996 Annual Report to
Shareholders and the information contained therein is incorporated by
reference.
On February 24, 1997 there were 1,298 shareholders of recordlesser vote of the Common Stock, of the Company based on information providedor
solely by the Company's
transfer agent.
ITEM 6. SELECTED FINANCIAL DATA
- - ---------------------------------
The response to this Item is contained in the 1996 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- - ---------------------
The response to this Item is contained in the 1996 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - -----------------------------------------------------
The response to this Item is contained in the 1996 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- - -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- - --------------------
None
-11-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------------------------------
The response to this Item is contained in part in the Proxy Statement
for the 1997 Annual Meetingaction of Shareholders under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
and the information contained therein is incorporated herein by reference.
The executive officers of the Company are elected annually at the Board of Directors, meeting held in conjunction with the annual meeting of
shareholders. There are no family relationships between any directors or
executive officers of the Company. Additional information regarding
executive officers is set forth in Part I, Item 4a.
ITEM 11. EXECUTIVE COMPENSATION
- - --------------------------------
The response to this Item is contained in the Proxy Statement for the
1997 Annual Meeting of Shareholders under the caption "Executive
Compensation" and the information contained therein is incorporated hereinif permitted by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - ------------------------------------------------------------------------
The response to this Item is contained in the Proxy Statement for the
1997 Annual Meeting of Shareholders under the captions "Votinglaw
at the Meeting" and "Stock Ownershiptime).
All shares of Management" and the information contained
therein is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------
The response to this Item is containedany one series shall be alike in
the Proxy Statement for the
1997 Annual Meeting of Shareholders under the caption "Executive
Compensation" and the information contained therein is incorporated herein
by reference.
-12-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- - -------------------------------------------------------------------------
(a)1. Financial Statements
--------------------
The following consolidated financial statements of Airborne Freight
Corporation and its subsidiaries as contained in its 1996 Annual Report to
Shareholders are incorporated by reference in Part II, Item 8:
Consolidated Statements of Net Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules
-----------------------------
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or are not
required, or because the required information is included in the
consolidated financial statements or notes thereto.
(a)3. Exhibits
- - ---------------
A) The following exhibits are filed with this report:
EXHIBIT NO. 3 Articles of Incorporation and By-laws
- - ----------------------------------------------------
3(a) The Restated Certificate of Incorporation of the Company,
dated as of August 4, 1987 (incorporated herein by reference
from Exhibit 3(a) to the Company's Form 10-K for the year
ended December 31, 1987).
3(b) The By-laws of the Company as amended to February 4,
1997.
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders
- - ------------------------------------------------------------------
Including Indentures
- - --------------------
4(a) Indenture dated as of August 15, 1991, between the
Company and Bank of America National Trust and Savings
Association, as Trustee,every particular, except with respect to the Company's 6-3/4%
Convertible Subordinated Debentures due August 15, 2001
(incorporated herein by reference from Exhibit 4(i) to
Amendment No. 1accrual of dividends
prior to the Company's Registration Statement on
Form S-3 No. 33-42044 filed withdate of issuance.
SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
Section 1. Designation and Number of
Shares. The shares of such series shall be designated as "Series
A Participating Cumulative Preferred Stock (without par value)"
(the "Series A Preferred Stock"). The number of shares initially
constituting the Securities and Exchange
Commission on August 15, 1991).
4(b) First Supplemental Trust Indenture dated asSeries A Preferred Stock shall be 300,000;
provided, however, that, if more than a total of June 30,
1994 between300,000 shares
of Series A Preferred Stock shall be issuable by the Company and LaSalle National Bank, as
Successor Trustee, with respect tocorporation
upon the Company's 6-3/4%
Convertible Subordinated Debentures due August 15, 2001
(incorporated by reference from Exhibit 4(d) toexercise of Rights (the "Rights") outstanding under the Company's
Form 10-K for the year ended December 31, 1996).
-13-
4(c) Indenture dated as of December 3, 1992, between the
Company and The Bank of New York, as trustee, relating to the
Company's 8-7/8% Notes due 2002 (incorporated by reference
from Exhibit 4(a) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, No. 33-54560 filed with
the Securities and Exchange Commission on December 4, 1992).
4(d) First Supplemental Indenture dated as of September 15,
1995, between the Company and The Bank of New York, as
trustee, relating to the Company's 7.35% Notes due 2005
(incorporated by reference from Exhibit 4(b) to Amendment No.
1 to the Company's Registration Statement on Form S-3, No. 33-
61329, filed with the Securities and Exchange Commission on
September 5, 1995).
4(e) Second Supplemental Indenture dated as of February 12,
1997 between the Company and The Bank of New York, as trustee,
relating to the Company's 8-7/8% Notes due 2002.
4(f)
Rights Agreement dated as of February 14, 1997 between the CompanyAirborne
Freight Corporation, a Delaware corporation ("ABF"), and The Bank
of New York, a New York banking corporation, as Rights Agent (incorporated by reference from Exhibit 1(the
"Rights Agreement"), following the date (the "Effective Date") on
which the corporation succeeds to the Company's
Registration Statement on Form 8-A, filedrights and obligations of
ABF under the Rights Agreement in connection with the Securities
and Exchange Commission on February 12, 1997).
4(g) Certificatemerger
pursuant to which ABF becomes a wholly-owned subsidiary of the
Voting Powers, Designations,
Preferencescorporation, the Board of Directors of the corporation, pursuant
to Section 151(g) of the General Corporation Law of the State of
Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and
Relative Participating, Optional and Other
Special Rights and Qualifications, Limitations or Restrictionsrecorded, in accordance with the provisions of Section 103
thereof, providing for the total number of shares of Series A
Participating Cumulative Preferred Stock authorized to be issued to be increased (to the
extent that the Certificate of Airborne Freight Corporation (incorporated by reference from
Exhibits 1 and 2Incorporation then permits) to the
Company's Registration Statement on
Form 8-A, filed with the Securities and Exchange Commission on
February 12, 1997.)
4(h) Formlargest number of Right Certificate relatingwhole shares (rounded up to the Rights
Agreement (see 4(f) above, incorporated by reference from
Exhibits 2 and 3nearest whole
number) issuable upon exercise of such Rights.
Section 2. Dividends or Distributions.
(a) Subject to the Company's Registration Statement on
Form 8-A, filed withprior and superior rights of the Securitiesholders of
shares of any other series of Preferred Stock or other class of
capital stock of the corporation ranking prior and Exchange Commission on
February 12, 1997.)
EXHIBIT NO. 10 Material Contracts
- - ---------------------------------
Executive Compensation Plans and Agreements
- - -------------------------------------------
10(a) 1983 Airborne Freight Corporation Key Employee Stock
Option and Stock Appreciation Rights Plan, as amended through
February 2, 1987 (incorporated by reference from Exhibit 10(c)superior to
the Company's Form 10-K forshares of Series A Preferred Stock with respect to dividends,
the year ended December 31,
1986).
10(b) 1989 Airborne Freight Corporation Key Employee Stock
Option and Stock Appreciation Rights Plan (incorporated herein
by reference from Exhibit 10(d) to the Company's Form 10-K for
the year ended December 31, 1989).
10(c) 1994 Airborne Freight Corporation Key Employee Stock Option
and Stock Appreciation Rights Plan (incorporated herein by
reference from the Addendum to the Company's Proxy Statement
for the 1994 Annual Meetingholders of Shareholders).
10(d) Airborne Freight Corporations Directors Stock Option
Plan (incorporated herein by reference from the Addendum to
the Company's Proxy Statement for the 1991 Annual Meeting of
Shareholders).
10(e) Airborne Freight Corporation Director Stock Bonus
Plan dated April 23, 1996 (incorporated by reference from
Exhibit 10(a) to the Company's Form 10-Q for the quarter ended
June 30, 1996).
-14-
10(f) Airborne Express Executive Deferral Plan dated
January 1, 1992 (incorporated by reference from Exhibit 10(b)
to the Company's Form 10-K for the year ended December 31,
1991).
10(g) Airborne Express Supplemental Executive Retirement
Plan dated January 1, 1992 (incorporated by reference from
Exhibit 10(c) to the Company's Form 10-K for the year ended
December 31, 1991).
10(h) Airborne Express 1995-1999 Executive Incentive
Compensation Plan, amended as of January 1, 1997.
10(i) Airborne Express 1997-1999 Executive Group Incentive
Compensation Plan as of January 1, 1997.
10(j) Employment Agreement dated December 15, 1983, as
amended November 20, 1986, between the Company and Mr. Robert
G. Brazier, President and Chief Operating Officer
(incorporated by reference from Exhibit 10(a) to the Company's
Form 10-K for the year ended December 31, 1986). Identical
agreements exist between the Company and the other six
executive officers.
10(k) Employment Agreement dated November 20, 1986 between
the Company and Mr. Lanny H. Michael, then Vice President,
Treasurer and Controller (incorporated by reference from
Exhibit 10(b) to the Company's Form 10-K for the year ended
December 31, 1986). The Company and its principal subsidiary,
ABX Air, Inc., have entered into substantially identical
agreements with most of their officers.
Other Material Contracts
------------------------
10(l) $240,000,000 Revolving Loan Facility dated as of
November 19, 1993 among the Company, as borrower, and Wachovia
Bank of Georgia, N.A., as agent, and Wachovia Bank of Georgia,
N.A., ABN AMRO Bank N.V., United States National Bank of
Oregon, Seattle-First National Bank, CIBC, Inc., Continental
Bank N.A., Bank of America National Trust and Savings
Association, The Bank of New York, NBD Bank, N.A., as banks
(incorporated herein by reference from Exhibit 10(k) to the
Company's Form 10-K for the year ended December 31, 1993).
10(m) First Amendment to Revolving Loan Facility dated as
of March 31, 1995 among the Company, as borrower, and Wachovia
Bank of Georgia, N.A., as Agent, and Wachovia Bank of Georgia,
N.A., ABN AMRO Bank N.V., United States National Bank of
Oregon, Seattle-First National Bank, CIBC, Inc., National City
Bank, Columbus, Bank of America National Trust and Savings
Association, The Bank of New York, and NBD Bank, N.A., as
banks (incorporated by reference from Exhibit 10(a) to the
Company's Form 10-Q for the quarter ended March 31, 1995).
10(n) Second Amendment to Credit Agreement dated May 1,
1996 among the Company, as borrower, and Wachovia Bank of
Georgia, N.A., as Agent, and Wachovia Bank of Georgia, N.A.,
ABN AMRO Bank N.V., United States National Bank of Oregon,
Bank of America NW, N.A., CIBC, Inc., National City Bank,
Columbus, as assignee of Continental Bank N.A., Bank of
America National Trust and Savings Association, The Bank of
New York and NBD Bank, N.A., as banks (incorporated by
reference from Exhibit 10(b) to the Company's Form 10-Q for
the quarter ended June 30, 1996).
-15-
10(o) Used Aircraft Sales Agreement entered into as of
December 22, 1995 between ABX Air, Inc. and KC-One, Inc; KC-
Two, Inc.; and KC-Three, Inc. Confidential treatment has been
granted for confidential commercial and financial information,
pursuant to Rule 24b-2 under the Securities Exchange Act of
1934 (incorporated herein by reference from Exhibit 10(n) to
the Company's From 10-K for the year ended December 31,
1996.).
EXHIBIT NO. 11 Statement Re Computation of Per Share Earnings
- - -------------------------------------------------------------
11 Statement re computation of earnings per share
EXHIBIT NO. 12 Statements Re Computation of Ratios
- - --------------------------------------------------
12 Statement re computation of ratio of senior long-term
debt and total long-term debt to total capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
- - ------------------------------------------------
13 Portionsshares of the 1996 Annual ReportSeries A Preferred Stock shall be
entitled to Shareholders of
Airborne Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
- - ---------------------------------------------
21 The subsidiaries of the Company are listed in Part I of
this report on Form 10-K for the year ended December 31, 1996.
EXHIBIT NO. 23 Consents of Expertsreceive, when, as and Counsel
- - ----------------------------------------------
23 Independent Auditors' Consent and Report on Schedule
EXHIBIT NO. 27 Financial Data Schedule
- - --------------------------------------
27 Financial Data Schedule
All other exhibits are omitted because they are not
applicable, or not required, or because the required
information is included in the consolidated financial
statements or notes thereto.
(b) Reports on Form 8-K
-------------------
A Form 8-K was filed February 12, 1997 which disclosed the following
information:
(1) Approval,if declared by the Board of
Directors, out of the assets of the corporation legally available
therefor, (1) quarterly dividends payable in cash on the last day
of each fiscal quarter in each year, or such other dates as the
Board of Directors of the corporation shall approve (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a shareholder rights
plan effective February 14, 1997.share or a fraction of a share of
Series A Preferred Stock, in the amount of $30 per whole share
(rounded to the nearest cent) less the amount of all cash
dividends declared on the Series A Preferred Stock pursuant to
the following clause (2) Summary descriptionsince the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock (the
total of which shall not, in any event, be less than zero) and
(2) dividends payable in cash on the payment date for each cash
dividend declared on the Common Stock in an amount per whole
share (rounded to the nearest cent) equal to the Formula Number
(as hereinafter defined) then in effect times the cash dividends
then to be paid on each share of Common Stock. In addition, if
the corporation shall pay any dividend or make any distribution
on the Common Stock payable in assets, securities or other forms
of noncash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the
corporation shall simultaneously pay or make on each outstanding
whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in
effect times such dividend or distribution on each share of the
Common Stock. As used herein, the "Formula Number" shall be 200;
provided, however, that, if at any time after the Effective Date,
the corporation shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any
distribution on the Common Stock in shares of Common Stock, (ii)
subdivide (by a stock split or otherwise) the outstanding shares
of Common Stock into a larger number of shares of Common Stock or
(iii) combine (by a reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then in each such event the Formula
Number shall be adjusted to a number determined by multiplying
the Formula Number in effect immediately prior to such event by a
fraction, the numerator of which is the number of shares of
Common Stock that are outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and provided
further that, if at any time after the Effective Date, the
corporation shall issue any shares of its capital stock in a
merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be
appropriately adjusted to reflect such merger, reclassification
or change so that each share of Preferred Stock continues to be
the economic equivalent of a Formula Number of shares of Common
Stock prior to such merger, reclassification or change.
(b) The corporation shall declare
a dividend or distribution on the Series A Preferred Stock as
provided in Section 2(a) immediately prior to or at the same time
it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution solely in shares of Common
Stock); provided, however, that, in the event no dividend or
distribution (other than a dividend or distribution in shares of
Common Stock) shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of
$30 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive a dividend or distribution declared thereon,
which record date shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.
(c) Dividends shall begin to
accrue and be cumulative on outstanding shares of Series A
Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of
Series A Preferred Stock; provided, however, that dividends on
such shares which are originally issued after the record date for
the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and on or prior to
the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly
Dividend Payment Date. Notwithstanding the foregoing, dividends
on shares of Series A Preferred Stock which are originally issued
prior to the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a
quarterly dividend on the first Quarterly Dividend Payment Date
shall be calculated as if cumulative from and after the last day
of the fiscal quarter next preceding the date of original
issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding.
(d) So long as any shares of the
Series A Preferred Stock are outstanding, no dividends or other
distributions shall be declared, paid or distributed, or set
aside for payment or distribution, on the Common Stock unless, in
each case, the dividend required by this Section 2 to be declared
on the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of
Series A Preferred Stock shall not be entitled to receive any
dividends or other distributions except as provided herein.
Section 3. Voting Rights. The holders
of shares of Series A Preferred Stock shall have the following
voting rights:
(a) Each holder of Series A
Preferred Stock shall be entitled to a number of votes equal to
the Formula Number then in effect, for each share of Series A
Preferred Stock held of record on each matter on which holders of
the Common Stock or stockholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any
holder of the Common Stock or stockholders generally then have
with respect to such matter (assuming any holding period or other
requirement to vote a greater number of shares is satisfied).
(b) Except as otherwise provided
herein or by applicable law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock shall
vote together as one class for the election of directors of the
corporation and on all other matters submitted to a vote of
stockholders of the corporation.
(c) If, at the time of any annual
meeting of stockholders for the election of directors, the
equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred
Stock are in default, the number of directors constituting the
Board of Directors of the corporation shall be increased by two.
In addition to voting together with the holders of Common Stock
for the election of other directors of the corporation, the
holders of record of the Series A Preferred Stock, voting
separately as a class to the exclusion of the holders of Common
Stock, shall be entitled at said meeting of stockholders (and at
each subsequent annual meeting of stockholders), unless all
dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors
of the corporation, the holders of any Series A Preferred Stock
being entitled to cast a number of votes per share of Series A
Preferred Stock equal to the Formula Number. Until the default in
payments of all dividends which permitted the election of said
directors shall cease to exist, any director who shall have been
so elected pursuant to the next preceding sentence may be removed
at any time, either with or without cause, only by the
affirmative vote of the holders of the shares of Series A
Preferred Stock at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and
any vacancy thereby created may be filled by the vote of such
holders. If and when such default shall cease to exist, the
holders of the Series A Preferred Stock shall be divested of the
foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of
dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been
elected directors pursuant to said special voting rights shall
forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights
granted by this Section 3(c) shall be in addition to any other
voting rights granted to the holders of the Series A Preferred
Stock in this Section 3.
(d) Except as provided herein, in
Section 11 or by applicable law, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for authorizing
or taking any corporate action.
Section 4. Certain Restrictions. (a)
Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares
of Series A Preferred Stock outstanding shall have been paid in
full, the corporation shall not
(i) declare or pay dividends
on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends
on or make any other distributions on any shares of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase
or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock;
provided that the corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the corporation ranking junior (either as
to dividends or upon dissolution, liquidation or winding up) to
the Series A Preferred Stock; or
(iv) purchase or otherwise
acquire for consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(b) The corporation shall not
permit any subsidiary of the corporation to purchase or otherwise
acquire for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Liquidation Rights. Upon
the liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, no distribution shall be made
(1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received an
amount equal to the accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $100 per
whole share or (y) an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Stock or (2) to the
holders of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all other such parity stock in proportion
to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up.
Section 6. Consolidation, Merger, etc.
In case the corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the
then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per
share equal to the Formula Number then in effect times the
aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which
each share of Common Stock is exchanged or changed. In the event
both this Section 6 and Section 2 appear to apply to a
transaction, this Section 6 will control.
Section 7. No Redemption; No Sinking
Fund. (a) The shares of Series A Preferred Stock shall not be
subject to redemption by the corporation or at the option of any
holder of Series A Preferred Stock except as set forth in Section
5 of Article Fourth of the Restated Certificate of Incorporation
of the corporation; provided, however, that the corporation may
purchase or otherwise acquire outstanding shares of Series A
Preferred Stock in the open market or by offer to any holder or
holders of shares of Series A Preferred Stock.
(b) The shares of Series A
Preferred Stock shall not be subject to or entitled to the
operation of a retirement or sinking fund.
Section 8. Ranking. The Series A
Preferred Stock shall rank junior to all other series of
Preferred Stock of the corporation unless the Board of Directors
shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other
special rights of the shares of such series and the
qualifications, limitations and restrictions thereof.
Section 9. Fractional Shares. The
Series A Preferred Stock shall be issuable upon exercise of the
Rights issued pursuant to the Rights Agreement in whole shares or
in any fraction of a share that is one one-hundredth of a share
or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to
receive dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock. In lieu of fractional
shares, the corporation, prior to the first issuance of a share
or a fraction of a share of Series A Preferred Stock, may elect
(a) to make a cash payment as provided in the Rights Agreement
for fractions of a share other than one one-hundredths of a share
or any integral multiple thereof or (b) to issue depository
receipts evidencing such authorized fraction of a share of Series
A Preferred Stock pursuant to an appropriate agreement between
the corporation and a depository selected by the corporation;
provided that such agreement shall provide that the holders of
such depository receipts shall have all the rights, privileges
and preferences to which they are entitled as holders of the
Series A Preferred Stock.
Section 10. Reacquired Shares. Any
shares of Series A Preferred Stock purchased or otherwise
acquired by the corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, without designation as to
series until such shares are once more designated as part of a
particular series by the Board of Directors pursuant to the
provisions of Section 4.2 of this Article Fourth.
Section 11. Amendment. None of the
powers, preferences and relative, participating, optional and
other special rights of the Series A Preferred Stock as provided
herein or in the Certificate of Incorporation shall be amended in
any manner which would alter or change the powers, preferences,
rights or privileges of the holders of Series A Preferred Stock
so as to affect them adversely without the affirmative vote of
the holders of at least 66-2/3% of the outstanding shares of
Series A Preferred Stock, voting as a separate class; provided,
however, that no such amendment approved by the holders of at
least 66-2/3% of the outstanding shares of Series A Preferred
Stock shall be deemed to apply to the powers, preferences, rights
or privileges of any holder of shares of Series A Preferred Stock
originally issued upon exercise of the Rights after the time of
such approval without the approval of such holder.
4.3 Except for and subject to those rights
expressly granted to the holders of Preferred Stock or any series
thereof by resolution or resolutions adopted by the Board of
Directors pursuant to Section 4.2 of this Article Fourth and
except as may be provided by the laws of the State of Delaware,
the holders of Common Stock shall have exclusively all other
rights of shareholders.
4.4.1 The Bylaws shall divide the
directors into three classes and prescribe the tenure of office
of the several classes; but such Bylaws shall not provide for the
election of any class for a period shorter than from the time of
election following the division into classes until the next
annual meeting, and thereafter for a period shorter than the
interval between annual meetings or for a period longer than
three years and shall provide that the term of the office of at
least one class shall expire each year. At all elections of
directors, voting shall be by class.
4.4.2 At all elections of directors of
the corporation, each holder of shares of Common Stock shall be
entitled to as many votes as shall equal the number of votes
which (except for such provision as to cumulative voting) he
would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of
directors to be elected, and he may cast all of such votes for a
single director or may distribute them among the number to be
voted for, or for any two or more of them as he may see fit.
FIFTH. The corporation is to have perpetual existence.
SIXTH. 6.1 In furtherance and not in limitation of the
powers conferred by statute, the board of directors is expressly
authorized:
6.1.1 To make, alter or repeal the bylaws
of the corporation.
6.1.2 To authorize and cause to be
executed mortgages and liens upon the real and personal property
of the corporation.
6.1.3 To set apart out of any of the
funds of the corporation available for dividends a reserve or
reserves for any proper purpose and to abolish any such reserve
in the manner in which it was created.
6.1.4 By a majority of the whole board,
to designate one or more committees, each committee to consist of
two or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent
provided in the resolution or in the bylaws of the corporation,
shall have and may exercise the powers of the board of directors
in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to
all papers which may require it; provided, however, the by-laws
may provide that in the absence or disqualification of any member
of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in
the place of any such absent or disqualified member.
6.1.5 When and as authorized by the
affirmative vote of the holders of a majority of the stock issued
and outstanding having voting power given at a stockholders'
meeting duly called upon such notice as is required by statute,
or when authorized by the written consent of the holders of a
majority of the voting stock issued and outstanding, to sell,
lease or exchange all or substantially all of the property and
assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property including shares of stock in, and/or other securities
of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the
corporation.
SEVENTH. 7.1 Whenever a compromise or arrangement is
proposed between this corporation and its creditors or any class
of them and/or between this corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of
this corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or
stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
EIGHTH. 8.1 Meetings of shareholders may be held within
or without the State of Delaware as the Bylaws may provide.
Notwithstanding any provision of law, no action may be taken by
the shareholders, including without limitation amendment of this
Certificate or of the Bylaws, except at a meeting duly called in
accordance with the Bylaws.
8.2 The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of
the corporation. Election of Directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.
NINTH. 9.1 The corporation shall at all times indemnify
its officers and directors from and against all expenses and
liabilities of whatsoever nature to the full extent permitted by
Delaware law, and without limiting the generality of the
foregoing, shall indemnify any director or officer or any former
director or former officer or any person who may have served at
its request as a director or officer of another corporation, and
the heirs, personal representatives and estates of each of them,
against all costs and expenses including attorneys' fees
reasonably incurred by him or imposed on him in connection with
any action, proceeding or investigation of whatsoever nature,
civil, administrative or criminal (including any shareholder's
action and any other action in which the corporation is a party,
plaintiff or defendant) in which he is or may be made a party or
is proceeded against or involved by reason of any action
whatsoever alleged to have been taken by him or omitted by him as
such director or officer, and against any liabilities, judgments,
fines, penalties or damages imposed against him in such action,
proceeding or investigation, or sums paid in settlement or
compromise thereof with the approval of the Board of Directors;
provided, that the provisions of this paragraph shall not apply
unless such person acted in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and
shall not apply if such person shall be duly and finally adjudged
(1) to be guilty of willful misconduct, bad faith or gross
negligence in the performance of his duties to the corporation,
in a derivative action or one brought by the corporation, or (2)
to be guilty of willful misconduct or bad faith, if such action
or proceeding is brought by a third party.
9.2 Expenses incurred in defending such action,
proceeding or investigation may be paid by the corporation in
advance of the final disposition thereof as authorized by the
Board of Directors in the specific case and upon receipt of an
undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation.
9.3 The corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was an
officer, director, employee or agent of the corporation, or is or
was serving at the request of the corporation as an officer,
director, employee and agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
whatsoever asserted against him and incurred by him in any such
capacity or arising out of his status as such, and against any
and all expenses in connection therewith, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this certificate of
incorporation or under Delaware law.
TENTH. 10.1 The corporation reserves the right to
amend, alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ELEVENTH. 11.1 A higher than majority shareholder rights plan.
-16-
SIGNATURES
Pursuantvote
for certain Business Combinations shall be required as follows
(all capitalized terms being used as subsequently defined
herein):
(a) In addition to any affirmative vote
required by law or the Certificate of Incorporation, and except
as otherwise expressly provided in Section 11.2 of this Article
Eleventh:
(1) any merger or consolidation of the
corporation or any Subsidiary with (A) any Interested Shareholder
or with (B) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an
Interested Shareholder;
(2) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder of any assets of the corporation or any
Subsidiary having an aggregate Fair Market Value of $10,000,000
or more;
(3) the issuance or sale by the
corporation or any Subsidiary (in one transaction or a series of
transactions) of any securities of the corporation or any
Subsidiary to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder in exchange for cash,
securities or other consideration (or a combination thereof)
having an aggregate Fair Market Value of $10,000,000 or more;
(4) the adoption of any plan or
proposal for the liquidation or dissolution of the corporation
proposed by or on behalf of any Interested Shareholder or any
Affiliate or associate of any Interested Shareholder; or
(5) any reclassification of securities
(including any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the corporation
with any of it Subsidiaries or any transaction (whether or not
with or into or otherwise involving an Interested Shareholder)
which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity
securities of the corporation or any Subsidiary which is directly
or indirectly owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder; shall
require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of common stock
of the corporation entitled to vote in an annual election of
directors, and at least 80% of the voting power of all shares of
all classes of capital stock of the corporation entitled to vote
in an annual election of directors (all such stock of all classes
constituting the "Voting Stock"), voting together as a single
class. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(b) The term "Business Combination" as used
in this Article Eleventh shall mean any transaction which is
referred to in any one or more of clauses (1) through (5) of
paragraph (a) of Section 11.1 of this Article Eleventh.
11.2 The provisions of Section 11.1 of this
Article Eleventh shall not be applicable to any Business
Combination, and such Business Combination shall require only
such affirmative vote (if any) as is required by law, any other
provision of the Certificate of such corporation or any agreement
with any national securities exchange, if all of the conditions
specified in either of the following paragraphs (a) or (b) are
met:
(a) The Business Combination shall have been
approved by a majority of the Continuing Directors; or
(b) All of the following six conditions
shall have been met:
(1) The transaction constituting the
Business Combination shall provide for a consideration to be
received by holders of Common Stock in exchange for their stock,
and the aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least
equal to the highest of the following:
(A) (if applicable) the highest
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid in order to acquire any
shares of Common Stock beneficially owned by the Interested
Shareholder which were acquired (i) within the two-year period
immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (ii)
in the transaction in which it became an Interested Shareholder,
whichever is higher; and
(B) the Fair Market Value per
share of Common Stock on the Announcement Date or on the date on
which the Interested Shareholder became an Interested Shareholder
(the "Determination Date"), whichever is higher.
(2) If the transaction constituting the
Business Combination shall provide for a consideration to be
received by holders of any class of outstanding Voting Stock
other than Common Stock, the aggregate amount of the cash and the
Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of such Voting Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of Section 13this clause (b)(2) shall be
required to be met with respect to every class of outstanding
Voting Stock, whether or 15(d)not the Interested Shareholder
beneficially owns any shares of a particular class of Voting
Stock):
(A) (if applicable) the highest
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid in order to acquire any
shares of such class of Voting Stock beneficially owned by the
Interested Shareholder which were acquired (i) within the two-
year period immediately prior to the Announcement Date or (ii) in
the transaction in which it became an Interested Shareholder,
whichever is higher;
(B) (if applicable) the highest
preferential amount per share to which the holders of shares of
such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the Securities
Exchange Actcorporation; and
(C) the Fair Market Value per
share of 1934,such class of Voting Stock on the Company has duly caused this reportAnnouncement Date or
on the Determination Date, whichever is higher.
(3) The consideration to be signed
on its behalfreceived by
holders of a particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same form as
was previously paid in order to acquire shares of such class of
Voting Stock which are beneficially owned by the undersigned, thereunto duly authorized.
AIRBORNE FREIGHT CORPORATION
By /s/ Robert S. Cline
--------------------------
Robert S. Cline
Chief Executive Officer
By /s/ Robert G. Brazier
--------------------------
Robert G. Brazier
Chief Operating Officer
By /s/ Roy C. Liljebeck
--------------------------
Roy C. Liljebeck
Chief Financial Officer
By /s/ Lanny H. Michael
--------------------------
Lanny H. Michael
TreasurerInterested
Shareholder. If the Interested Shareholder beneficially owns
shares of any class of Voting Stock which were acquired with
varying forms of consideration, the form of consideration to be
received by holders of such class of Voting Stock shall be either
cash or the form used to acquire the largest number of shares of
such class of Voting Stock beneficially owned by it.
(4) After such Interested Shareholder
has become an Interested Shareholder and Controller
Date: March 27, 1997
Pursuantprior to the
consummation of such Business Combination: (A) there shall have
been (i) no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision of
the Common Stock), except as approved by a majority of the
Continuing Directors, and (ii) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the
event of any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Continuing Directors; and (B) such Interested Shareholder shall
not have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction in which it became
an Interested Shareholder.
(5) After such Interested Shareholder
has become an Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the
corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
(6) A proxy or information statement
describing the proposed Business Combination and complying with
the requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
public shareholders of the corporation at least 30 days prior to
the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
11.3 For the purposes of this reportArticle Eleventh:
(a) A "person" shall mean any individual,
firm, corporation or other entity.
(b) "Interested Shareholder" at any
particular time shall mean any person (other than the corporation
or any Subsidiary) who or which:
(1) is at such time the beneficial
owner, directly or indirectly, of more than 20% of the voting
power of the outstanding Voting Stock;
(2) is at such time a director of the
corporation and at any time within the two-year period
immediately prior to such time was the beneficial owner, directly
or indirectly, of more than 20% of the voting power of the then
outstanding Voting Stock; or
(3) is at such time an assignee of or
has been signed belowotherwise succeeded to the beneficial ownership of any shares
of Voting Stock which were at any time within the two-year period
immediately prior to such time beneficially owned by any
Interested Shareholder, if such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(c) A person shall be a "beneficial owner"
of any shares of Voting Stock:
(1) which such person or any of its
Affiliates or Associates beneficially owns, directly or
indirectly;
(2) which such person or any of its
Affiliates or Associates has (A) the right to acquire (whether or
not such right is exercisable immediately) pursuant to any
agreement, arrangements or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding; or
(3) which are beneficially owned,
directly or indirectly, by any other person with which such
person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(d) For the purposes of determining whether
a person is an Interested Shareholder pursuant to paragraph (b)
of this Section 11.3, the number of shares of Voting Stock deemed
to be outstanding shall include shares deemed owned by an
Interested Shareholder through application of paragraph (c) of
this Section 11.3 but shall not include any other shares of
Voting Stock which may be issuable pursuant to any agreement,
arrangements or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
(e) "Affiliate" or "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on March 1, 1984 (the term "registrant"
in said Rule 12b-2 meaning in this case the corporation).
(f) "Subsidiary" means any corporation of
which a majority of any class of equity security is owned,
directly or indirectly, by the following persons on behalfcorporation; provided, however,
that for the purposes of the Registrantdefinition of Interested Shareholder
set forth in paragraph (b) of this Section 11.3, the term
"Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly,
by the corporation.
(g) "Continuing Director" means any member
of the Board of Directors of the corporation who is unaffiliated
with, and not a representative of, the Interested Shareholder and
was a member of the Board of Directors prior to the time that the
Interested Shareholder became an Interested Shareholder, and any
successor of a Continuing Director who is unaffiliated with and
not a representative of, the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Board of Directors.
(h) "Fair Market Value" means: (1) in the
capacities andcase stock of the corporation, the highest closing sale price
during a 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks ("Composite Tape"), or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange
(NYSE), or, if such stock is not listed on the NYSE, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed,
or, if such stock is not listed on any such exchange, the highest
closing sale price or closing bid quotation (whichever is higher,
if both are reported) with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or any system then in use, or if no
such quotations are available, the fair market value on the date
indicated:
/s/ Robert G. Brazier /s/ Andrew V. Smith
- - ----------------------------- -----------------------------
Robert G. Brazier (Director) Andrew V. Smith (Director)
/s/ Robert S. Cline /s/ Mary Agnes Wilderotter
- - ----------------------------- -----------------------------
Robert S. Cline (Director) Mary Agnes Wilderotter (Director)
/s/ Harold M. Messmer, Jr. /s/ James H. Carey
- - ----------------------------- -----------------------------
Harold M. Messmer, Jr.(Director) James H. Carey (Director)
-17-in question of a share of such stock as determined by the Board
of Directors in good faith; (2) in the case of securities, other
than stock of the corporation, which are registered under Section
12 of the 1934 Act, the mean (average) of the closing sale prices
for the five business days prior to the date in question for such
securities on the Composite Tape, or if such securities are not
listed on the NYSE, on the principal United States securities
exchange registered under the 1934 Act on which such securities
are listed, or, if such securities are not listed on any such
exchange but are listed on the NASDAQ national list or national
market system, the average closing sale price or closing bid
quotation (whichever is higher, if both are reported) for the
five business days prior to the date in question, as quoted on
the NASDAQ system, or if such securities are not so listed or
such quotations are not available, then the Market Value of such
securities as determined by the Board of Directors in good faith;
and (3) in the case of property other than cash or securities of
the type described above, the fair market value of such property
on the date in question as determined by the Board of Directors
in good faith.
(i) In the event of any Business Combination
in which the corporation survives, the phrase "consideration
other than cash to be received" as used in paragraph (b) of
Section 11.2 of this Article Eleventh shall include the shares of
Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
11.4 The Board of Directors shall have the power
and duty to determine for the purpose of this Article Eleventh,
on the basis of information known to them after reasonable
inquiry (a) whether a person is an Interested Shareholder, (b)
the number of shares of Voting Stock beneficially owned by any
person, (c) whether a person is an Affiliate or Associate of
another, and (d) whether the assets which are the subject of any
business transaction which may be a Business Combination have, or
the consideration to be received for the issuance or transfer of
securities by the corporation or any Subsidiary in any
transaction which may be a Business Combination has, an aggregate
Fair Market Value of $10,000,000 or more. Any such determination
made in good faith shall be binding and conclusive on all
parties.
11.5 Nothing contained in this Article Eleventh
shall be construed to relieve any Interested Shareholder from any
fiduciary obligation imposed by law.
11.6 Notwithstanding any other provisions hereof
or of law, the Certificate of Incorporation or the Bylaws of the
corporation, the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding shares of Common
Stock, and at least 80% of the voting power of all of the then
outstanding shares of Voting Stock, voting together as a single
class, shall be required to amend or repeal, or to adopt any
provision inconsistent with this Article Eleventh.
TWELFTH. 12.1 No director of the corporation shall be
personally liable to the corporation or its stockholders for
monetary damages for breach of his or her fiduciary duty as a
director; provided, however, that this Article Twelfth shall not
eliminate or limit the liability of a director to the extent
provided by applicable law (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware (or
successor provision), or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or
repeal of this Article Twelfth shall apply to or have any effect
on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
DATED as of the 15th day of December, 2000.
AIRBORNE FREIGHT CORPORATION,
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
-------- -------- -------- -------- --------
DEDUCTED FROM ASSETS TO WHICH THEY APPLY:
1. Allowance for doubtful accounts -
Year Ended December 31, 1996 $7,750 $16,157 $15,562 $8,345
Year Ended December 31, 1995 $7,500 $13,309 $13,059 $7,750
Year Ended December 31, 1994 $6,925 $12,631 $12,056 $7,500
-18-
EXHIBIT INDEX
Exhibit Page
Number Description Number
- - ------- ------------ -------
(a)3. Exhibits
- - ---------------
A) The following exhibits are filed with this report:
EXHIBIT NO. 3 Articles of Incorporation and By-laws
- - ----------------------------------------------------
3(a) The Restated Certificate of Incorporation of the --
Company, dated as of August 4, 1987
(incorporated herein by reference from Exhibit
3(a) to the Company's Form 10-K for the year
ended December 31, 1987).
3(b) The By-laws of the Company as amended to --
February 4, 1997.
EXHIBIT NO. 4 Instruments Defining the Rights of Security Holders
- - ------------------------------------------------------------------
Including Indentures
- - --------------------
4(a) Indenture dated as of August 15, 1991, between --
the Company and Bank of America National Trust
and Savings Association, as Trustee, with
respect to the Company's 6-3/4% Convertible
Subordinated Debentures due August 15, 2001
(incorporated herein by reference from Exhibit
4(i) to Amendment No. 1 to the Company's
Registration Statement on Form S-3 No. 33-42044
filed with the Securities and Exchange
Commission on August 15, 1991).
4(b) First Supplemental Trust Indenture dated as of --
June 30, 1994 between the Company and LaSalle
National Bank, as Successor Trustee, with
respect to the Company's 6-3/4% Convertible
Subordinated Debentures due August 15, 2001
(incorporated by reference from Exhibit 4(d) to
the Company's Form 10-K for the year ended
December 31, 1996).
4(c) Indenture dated as of December 3, 1992, between --
the Company and The Bank of New York, as
trustee, relating to the Company's 8-7/8% Notes
due 2002 (incorporated by reference from Exhibit
4(a) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, No. 33-54560
filed with the Securities and Exchange
Commission on December 4, 1992).
4(d) First Supplemental Indenture dated as of --
September 15, 1995, between the Company and The
Bank of New York, as trustee, relating to the
Company's 7.35% Notes due 2005 (incorporated by
reference from Exhibit 4(b) to Amendment No. 1
to the Company's Registration Statement on Form
S-3, No. 33-61329, filed with the Securities and
Exchange Commission on September 5, 1995).
4(e) Second Supplemental Indenture dated as of --
February 12, 1997 between the Company and The
Bank of New York, as trustee, relating to the
Company's 8-7/8% Notes due 2002.
4(f) Rights Agreement, dated as of February 14, 1997 --
between the Company and The Bank of New York, as
Rights Agent (incorporated by reference from
Exhibit 1 to the Company's Registration
Statement on Form 8-A, filed with the Securities
and Exchange Commission on February 12, 1997).
4(g) Certificate of the Voting Powers, Designations, --
Preferences and Relative Participating, Optional
and Other Special Rights and Qualifications,
Limitations or Restrictions of Series A
Participating Cumulative Preferred Stock of
Airborne Freight Corporation (incorporated by
reference from Exhibits 1 and 2 to the Company's
Registration Statement on Form 8-A, filed with
the Securities and Exchange Commission on
February 12, 1997.)
4(h) Form of Right Certificate relating to the Rights --
Agreement (see 4(f) above, incorporated by
reference from Exhibits 2 and 3 to the Company's
Registration Statement on Form 8-A, filed with
the Securities and Exchange Commission on
February 12, 1997.)
EXHIBIT NO. 10 Material Contracts
- - ----------------------------------
Executive Compensation Plans and Agreements
- - -------------------------------------------
10(a) 1983 Airborne Freight Corporation Key Employee --
Stock Option and Stock Appreciation Rights Plan,
as amended through February 2, 1987
(incorporated by reference from Exhibit 10(c) to
the Company's Form 10-K for the year ended
December 31, 1986).
10(b) 1989 Airborne Freight Corporation Key Employee --
Stock Option and Stock Appreciation Rights Plan
(incorporated herein by reference from Exhibit
10(d) to the Company's Form 10-K for the year
ended December 31, 1989).
10(c) 1994 Airborne Freight Corporation Key Employee --
Stock Option and Stock Appreciation Rights Plan
(incorporated herein by reference from the
Addendum to the Company's Proxy Statement for
the 1994 Annual Meeting of Shareholders).
10(d) Airborne Freight Corporations Directors Stock --
Option Plan (incorporated herein by reference
from the Addendum to the Company's Proxy
Statement for the 1991 Annual Meeting of
Shareholders).
10(e) Airborne Freight Corporation Director Stock --
Bonus Plan dated April 23, 1996 (incorporated by
reference from Exhibit 10(a) to the Company's
Form 10-Q for the quarter ended June 30, 1996).
10(f) Airborne Express Executive Deferral Plan dated --
January 1, 1992 (incorporated by reference from
Exhibit 10(b) to the Company's Form 10-K for the
year ended December 31, 1991).
10(g) Airborne Express Supplemental Executive --
Retirement Plan dated January 1, 1992
(incorporated by reference from Exhibit 10(c) to
the Company's Form 10-K for the year ended
December 31, 1991).
10(h) Airborne Express 1995-1999 Executive Incentive --
Compensation Plan, amended as of January 1,
1997.
10(I) Airborne Express 1997-1999 Executive Group --
Incentive Compensation Plan as of January 1,
1997.
10(j) Employment Agreement dated December 15, 1983, as --
amended November 20, 1986, between the Company
and Mr. Robert G. Brazier, President and Chief
Operating Officer (incorporated by reference
from Exhibit 10(a) to the Company's Form 10-K
for the year ended December 31, 1986).
Identical agreements exist between the Company
and the other six executive officers.
10(k) Employment Agreement dated November 20, 1986 --
between the Company and Mr. Lanny H. Michael,
then Vice President, Treasurer and Controller
(incorporated by reference from Exhibit 10(b) to
the Company's Form 10-K for the year ended
December 31, 1986). The Company and its
principal subsidiary, ABX Air, Inc., have
entered into substantially identical agreements
with most of their officers.
Other Material Contracts
------------------------
10(l) $240,000,000 Revolving Loan Facility dated as of --
November 19, 1993 among the Company, as
borrower, and Wachovia Bank of Georgia, N.A., as
agent, and Wachovia Bank of Georgia, N.A., ABN
AMRO Bank N.V., United States National Bank of
Oregon, Seattle-First National Bank, CIBC, Inc.,
Continental Bank N.A., Bank of America National
Trust and Savings Association, The Bank of New
York, NBD Bank, N.A., as banks (incorporated
herein by reference from Exhibit 10(k) to the
Company's Form 10-K for the year ended December
31, 1993).
10(m) First Amendment to Revolving Loan Facility dated --
as of March 31, 1995 among the Company, as
borrower, and Wachovia Bank of Georgia, N.A., as
Agent, and Wachovia Bank of Georgia, N.A., ABN
AMRO Bank N.V., United States National Bank of
Oregon, Seattle-First National Bank, CIBC, Inc.,
National City Bank, Columbus, Bank of America
National Trust and Savings Association, The Bank
of New York, and NBD Bank, N.A., as banks
(incorporated by reference from Exhibit 10(a) to
the Company's Form 10-Q for the quarter ended
March 31, 1995).
10(n) Second Amendment to Credit Agreement dated May --
1, 1996 among the Company, as borrower, and
Wachovia Bank of Georgia, N.A., as Agent, and
Wachovia Bank of Georgia, N.A., ABN AMRO Bank
N.V., United States National Bank of Oregon,
Bank of America NW, N.A., CIBC, Inc., National
City Bank, Columbus, as assignee of Continental
Bank N.A., Bank of America National Trust and
Savings Association, The Bank of New York and
NBD Bank, N.A., as banks (incorporated by
reference from Exhibit 10(b) to the Company's
Form 10-Q for the quarter ended June 30, 1996).
10(o) Used Aircraft Sales Agreement entered into as of --
December 22, 1995 between ABX Air, Inc. and KC-
One, Inc; KC-Two, Inc.; and KC-Three, Inc.
Confidential treatment has been granted for
confidential commercial and financial
information, pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934 (incorporated
herein by reference from Exhibit 10(n) to the
Company's From 10-K for the year ended December
31, 1996.).
EXHIBIT NO. 11 Statement Re Computation of Per Share Earnings
- - --------------------------------------------------------------
11 Statement re computation of earnings per share --
EXHIBIT NO. 12 Statements Re Computation of Ratios
- - --------------------------------------------------
12 Statement re computation of ratio of senior long- --
term debt and total long-term debt to total
capitalization
EXHIBIT NO. 13 Annual Report to Security Holders
- - -------------------------------------------------
13 Portions of the 1996 Annual Report to --
Shareholders of Airborne Freight Corporation
EXHIBIT NO. 21 Subsidiaries of the Registrant
- - ----------------------------------------------
21 The subsidiaries of the Company are listed in --
Part I of this report on Form 10-K for the year
ended December 31, 1996.
EXHIBIT NO. 23 Consents of Experts and Counsel
- - -----------------------------------------------
23 Independent Auditors' Consent and Report on --
Schedules
EXHIBIT NO. 27 Financial Data Schedule
- - ---------------------------------------
27 Financial Data Schedule --
All other exhibits are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
-------------------
A form 8-K was filed February 12, 1997 which disclosed
the following information:
(1) Approval, by the Board of Directors, of a --
shareholder rights plan effective February 14,
1997.
(2) Summary description of the shareholder rights --
plan.
Incorporator
By /s/ David C. Anderson
David C. Anderson
Corporate Secretary