-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JH9eDGAMrO9AKDzcAIFOzAfhRPQKi0u+TQWkFrhpduR0qv+i3Upw20VyvRQpZA7O BlA9IPzIb43TUT6aRLjcqQ== 0000003000-98-000010.txt : 19980518 0000003000-98-000010.hdr.sgml : 19980518 ACCESSION NUMBER: 0000003000-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRBORNE FREIGHT CORP /DE/ CENTRAL INDEX KEY: 0000003000 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 910837469 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06512 FILM NUMBER: 98622082 BUSINESS ADDRESS: STREET 1: P O BOX 662 CITY: SEATTLE STATE: WA ZIP: 98111 BUSINESS PHONE: 2062854600 10-Q 1 03/31/98 FORM 10Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1998 Commission File Number 1-6512 AIRBORNE FREIGHT CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware ---------------------------------------- (State of incorporation or organization) 91-0837469 --------------------------------- (IRS Employer Identification No.) 3101 Western Avenue P.O. Box 662 Seattle, Washington 98111-0662 ------------------------------ (Address of Principal Executive Office) Registrant's telephone number, including area code: (206) 285-4600 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: XXX No: --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the close of the period covered by this report. Common Stock, par value $1 per share Outstanding (net of 497,078 treasury shares) as of March 31, 1998 50,184,794 shares ----------------- 2 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET EARNINGS (Dollars in thousands except per share data) (Unaudited)
Three Months Ended March 31 ------------------ 1998 1997 ---- ---- REVENUES: Domestic $662,518 $562,111 International 87,675 93,411 -------- -------- 750,193 655,522 OPERATING EXPENSES: Transportation purchased 230,323 208,890 Station and ground operations 222,694 200,250 Flight operations and maintenance 117,403 103,783 General and administrative 59,950 51,829 Sales and marketing 17,399 16,178 Depreciation and amortization 44,888 42,271 -------- -------- 692,657 623,201 -------- -------- EARNINGS FROM OPERATIONS 57,536 32,321 INTEREST, NET 3,916 8,447 -------- -------- EARNINGS BEFORE INCOME TAXES 53,620 23,874 INCOME TAXES 21,260 9,500 -------- -------- NET EARNINGS 32,360 14,374 ======== ======== NET EARNINGS PER SHARE: BASIC $ .65 $ .34 ======== ======== DILUTED $ .63 $ .31 ======== ======== DIVIDENDS PER SHARE $ .038 $ .038 ======== ========
See notes to consolidated financial statements. 3 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
March 31 December 31 ------------ ------------ 1998 1997 ---- ---- (Unaudited) (Unaudited) ASSETS ------ CURRENT ASSETS: Cash $ 22,166 $ 25,525 Trade accounts receivable, less allowance of $10,290 and $10,290 320,121 322,549 Spare parts and fuel inventory 39,387 37,966 Deferred income tax assets 15,477 14,530 Prepaid expenses and other 23,676 25,982 ---------- ---------- TOTAL CURRENT ASSETS 420,827 426,552 PROPERTY AND EQUIPMENT, NET 922,080 916,331 EQUIPMENT DEPOSITS and OTHER ASSETS 26,546 23,090 ---------- ---------- TOTAL ASSETS $1,369,453 $1,365,973 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 136,584 $ 143,966 Salaries, wages and related taxes 60,762 80,154 Accrued expenses 84,137 100,126 Income taxes payable 12,475 5,440 Current portion of debt 386 381 ---------- ---------- TOTAL CURRENT LIABILITIES 294,344 330,067 LONG-TERM DEBT 248,993 250,559 DEFERRED INCOME TAX LIABILITIES 72,711 65,322 OTHER LIABILITIES 47,987 49,110 SHAREHOLDERS' EQUITY: Preferred Stock, without par value - Authorized 5,200,000 shares, no shares issued Common stock, par value $1 per share - Authorized 60,000,000 shares Issued 50,681,872 and 50,428,548 shares 50,682 50,429 Additional paid-in capital 290,935 287,208 Retained earnings 364,567 334,083 ---------- ---------- 706,184 671,720 Treasury stock, 497,078 and 522,300 (766) (805) shares, at cost ---------- ---------- 705,418 670,915 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,369,453 $1,365,973 ========== ==========
See notes to consolidated financial statements. 4 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended March 31 ------------------ 1998 1997 ---- ---- OPERATING ACTIVITIES: Net Earnings $ 32,360 $ 14,374 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 41,302 39,284 Provision for aircraft engine overhauls 3,586 2,987 Deferred income taxes 6,442 2,578 Other (1,076) (1,252) -------- -------- CASH PROVIDED BY OPERATIONS 82,614 57,971 Change in: Receivables 2,428 (16,014) Inventories and prepaid expenses 885 (1,623) Accounts payable (7,382) (5,473) Accrued expenses, salaries and taxes payable (28,005) 8,201 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 50,540 43,062 INVESTING ACTIVITIES: Additions to property and equipment (47,949) (39,668) Disposition of property and equipment 136 47 Expenditures for engine overhauls (4,238) (2,585) Proceeds from insurance on aircraft accident -- 18,000 Other (2,088) 260 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (54,139) (23,946) FINANCING ACTIVITIES: Payments on bank notes, net (1,500) (43,000) Principal payments on debt (62) (57) Proceeds from common stock issuance 3,678 400 Dividends paid (1,876) (1,597) -------- -------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 240 (44,254) -------- -------- NET DECREASE IN CASH (3,359) (25,138) CASH AT JANUARY 1 25,525 35,816 -------- -------- CASH AT MARCH 31 $ 22,166 $ 10,678 ======== ========
See notes to consolidated financial statements. 5 AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (Unaudited) NOTE A--SUMMARY OF FINANCIAL STATEMENT PREPARATION: The consolidated financial statements included herein are unaudited but include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods reported. Certain amounts for prior periods have been reclassified to conform to the 1998 presentation. NOTE B--LONG-TERM DEBT: Long-term debt consists of the following:
March 31 December 31 1998 1997 ---- ---- (In thousands) Senior debt: Notes payable $ 28,500 $ 30,000 Senior notes 200,000 200,000 Revenue bonds 13,200 13,200 Other debt 7,678 7,740 -------- -------- 249,378 250,940 Less current portion 385 381 -------- -------- $248,993 $250,559 ======== ========
NOTE C--EARNINGS PER SHARE: Basic earnings per share are based upon the weighted average number of common shares outstanding during the interim period. Diluted earnings per share are based upon the weighted average number of common shares outstanding during the interim period plus dilutive common equivalent shares applicable to the assumed exercise of outstanding stock options. Diluted earnings per share for the three months ended March 31, 1997, assumes conversion of the Company's convertible subordinated debentures as well as the dilutive common equivalent shares applicable to the assumed exercise of stock options. Net earnings as adjusted for the elimination of interest expense, net of applicable taxes was $15,438,000. 6 Weighted average shares outstanding used in earnings per share computations were as follows:
Three Months Ended ------------------ March 31 ------- 1998 1997 ---- ---- WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 50,026,298 42,637,255 Diluted 51,181,203 49,533,160 /TABLE 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: The Company's operating performance in the first quarter of 1998 resulted in operating income and net earnings significantly higher than the first quarter of 1997. Strong growth in domestic shipments, and a growth rate in domestic revenue that exceeded the growth rate in shipments were positive factors impacting operating results. The operating margin of 7.7% is the strongest first quarter performance experienced by the Company. Net earnings for the first quarter of 1998 were $32.4 million, or $.63 per share on a diluted basis, compared to net earnings of $14.4 million, or $.31 per share for the comparable period of 1997. The following table sets forth selected shipment and revenue data for the periods indicated:
Three Months Ended March 31 --------------------------- 1998 1997 ---- ---- Shipments (in thousands): Domestic Overnight 45,759 39,639 Next Afternoon Service 14,383 12,164 Second Day Service 18,011 15,809 100 Lbs. and Over 91 74 ------ ------ Total Domestic 78,244 67,686 ------ ------ International Express 1,389 1,181 Freight 110 116 ------ ------ Total International 1,499 1,297 ------ ------ Total Shipments 79,743 68,983 ====== ====== Average Pounds per Shipment: Domestic 4.36 4.30 International 44.15 49.99 Average Revenue per Pound: Domestic $ 1.92 $ 1.92 International $ 1.31 $ 1.41 Average Revenue per Shipment: Domestic $ 8.46 $ 8.29 International $58.49 $72.02
Total shipments increased 15.6% in the first quarter of 1998 compared to 8.4% in the first quarter of 1997. Total revenues increased 14.4% in the first quarter of 1998 compared to 9.6% in the first quarter of 1997. Domestic revenue growth for the first quarter of 1998 continued to be positively impacted by strong growth in higher yielding overnight shipments and the Company's continuing focus on yield enhancement. Domestic revenues increased 17.9% in the first quarter of 1998 compared to 11.1% in the first quarter of 1997. A growth rate in domestic revenue that exceeded the growth rate in shipments had a significant positive impact on domestic operating margins in the first quarter of 1998. The average revenue per domestic shipment increased 2.1% to $8.46 in the first quarter of 1998 compared to the first quarter of 1997. Domestic revenues in the first quarter of 1997 included $4.9 million of revenue from a fuel surcharge which was implemented on February 17, 1997 for most domestic business and was repealed effective July 1, 1997. This 8 fuel surcharge revenue accounted for approximately $.05 per share in the first quarter of 1997. Overnight shipments accounted for 58.5% of total domestic shipments in the first quarter of 1998, comparable to the overnight shipment percentage achieved in the first quarter of 1997. The higher yielding overnight shipments increased 15.4% in the first quarter of 1998, compared to 11.1% in the corresponding 1997 period. The Company's deferred service products also experienced strong growth, increasing 15.8% on a combined basis in the first quarter of 1998 compared to 4.8% in the corresponding period of 1997. International revenues decreased 6.1% in the first quarter of 1998, primarily the result of economic troubles in parts of Asia. This compares to a 1.8% increase in revenues in the first quarter of 1997. Shipments in the heavier weight, higher revenue per shipment freight segment decreased 5.2% in the first quarter. Mitigating some of the weakness in freight volumes, the Company experienced strong growth in its international express segment. International express shipments increased 17.6% in the first quarter of 1998 compared to 11.6% in the corresponding period of 1997. Operating expenses as a percentage of revenues were 92.3% for the first quarter of 1998 compared to 95.1% in the corresponding period of 1997 and 92.3% for all of 1997. Operating cost per shipment handled decreased 3.9% to $8.69 for the first quarter of 1998 compared to the first quarter of 1997. The Company experienced a 6.8% improvement in productivity for the first quarter of 1998, compared to the first quarter of 1997, as measured by shipments handled per paid employee hour. Continued strong productivity improvement and continued emphasis on cost control were significant factors having a positive impact on 1998 operating results. Comparisons of certain operating expense components are discussed below. Transportation purchased decreased as a percentage of revenues to 30.7% in the first quarter of 1998 compared to 31.9% in the comparable period of 1997. This decrease was primarily due to commercial airline costs which, although higher in total, were lower as a percentage of total revenues in the first quarter of 1998 due to the lower growth in international freight shipments discussed above. The suspension of the Federal Aviation Excise Tax reduced costs in the first quarter of 1997 by $4.3 million. The Aviation Excise Tax moratorium was effective through March 6, 1997, subsequent to which the tax became effective once again; therefore, no cost reduction was realized in 1998. Station and ground expense as a percentage of revenues decreased to 29.7% in the first quarter of 1998 compared to 30.5% in the first quarter of 1997. Strong productivity improvement had a positive impact on this category of expense measured as a percentage of revenues. Flight operations and maintenance expense as a percentage of revenues during the first quarter of 1998 was 15.6%, compared to 15.8% in the first quarter of 1997. The average aviation fuel price for the first quarter of 1998 was $.62 per gallon compared to $.82 per gallon in the first quarter of 1997. Aviation fuel consumption increased to 44.1 million gallons in the first quarter of 1998, a 9.3% increase over the first quarter of 1997. As a result of fuel hedging contracts, the Company incurred $1.0 million of expense in the first quarter of 1998 compared to a $1.7 million benefit in the first quarter of 1997. Offsetting the lower fuel costs were higher costs associated with periodic aircraft maintenance checks. The increase in depreciation and amortization expense in the first quarter of 1998 is due in large part to the increased number of aircraft in service since the first quarter of 1997. Interest expense in the first quarter of 1998 was significantly lower than the same period of 1997. This is attributable to the significant reduction in average outstanding borrowings in the first quarter of 1998, compared to the corresponding period of 1997. The Company's effective tax rate was 39.6% in the first quarter of 1998 compared to 39.8% in the first quarter of 1997 and 39.2% for all of 1997. LIQUIDITY AND CAPITAL RESOURCES: Cash provided by operations net of change in working capital increased for the first quarter of 1998 to $51 million, compared to $43 million in the first quarter of 1997. This increased liquidity is primarily the result of the significant increase in profitability in 1998. 9 Capital expenditures continue to be a primary factor affecting the financial condition of the Company. The Company anticipates total capital expenditures to approximate $274 million in 1998. During the first quarter of 1998, total capital expenditures net of dispositions were $48 million. Cash provided by operations was the primary source for funding capital expenditures. The Company's strong operating cash flow has become the major source of liquidity, whereas, the Company's $250 million unsecured revolving bank credit agreement had traditionally been used as the major source of liquidity for periods between other financing transactions. The Company also has available $65 million under unsecured uncommitted money market lines of credit with several banks, used in conjunction with the revolving credit agreement to facilitate settlement and accommodate short-term borrowing fluctuations. Reliance on the bank facilities has decreased commensurately, with a total of $28.5 million outstanding at March 31, 1998 under the revolving bank credit and money market credit lines, compared to $30.0 million outstanding at December 31, 1997 and $145.5 million outstanding at March 31, 1997. In management's opinion, the available capacity under the bank credit agreements coupled with internally generated cash flow from remaining 1998 operations should provide adequate flexibility to finance anticipated capital expenditures for the balance of 1998. 10 PART II. OTHER INFORMATION -------------------------- Item 4. Submission of Matters to a Vote of Security Holders. The annual meeting of Airborne Freight Corporation was held at Cavanaugh's on Fifth Avenue, 1415 Fifth Avenue, Seattle, Washington 98101 on April 28, 1998, at which a total of 45,474,266 shares were represented at the meeting comprising 89.9% of the outstanding shares of the Company entitled to vote at the meeting on the record date (February 23, 1998). The following directors were duly elected for terms ending in 2001, in each case by an affirmative vote in excess of 99.1% of the shares represented at the meeting: Number of Shares Voted For --------- Andrew Brimmer 45,114,648 Harold M. Messmer, Jr. 45,106,118 Mary Agnes Wilderotter 45,115,890 The following are continuing directors with terms expiring as indicated: Terms Expiring in 1999 Terms Expiring in 2000 ---------------------- ---------------------- Robert G. Brazier Robert S. Cline James H. Carey Richard M. Rosenberg Andrew B. Kim William Swindells The shareholders, by an affirmative vote in excess of 79.9% of the outstanding shares, approved the amendment of the Restated Certificate of Incorporation of the Company to increase the number of authorized shares of Common Stock from 60,000,000 to 120,000,000. 40,078,459 votes were cast for the proposal, 5,259,962 against, with 135,845 abstentions. The shareholders, by an affirmative vote in excess of 50.3% of the votes cast at the meeting, approved the Airborne Freight Corporation 1998 Key Employee Stock Option Plan. 19,680,692 votes were cast for the proposal, 19,200,755 against, with 179,240 abstentions and 6,413,579 broker nonvotes. The Airborne Board of Directors on the same date, April 28, 1998, reelected all existing executive officers, including Robert S. Cline as Chairman and Chief Executive Officer, and Robert G. Brazier as President and Chief Operating Officer. The Board of Directors declared a quarterly cash dividend of $.04 per share on the Common Stock of the Company payable on May 26, 1998 to shareholders of record on May 12, 1998. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - EXHIBIT NO. 3 The Restated Certificate of Incorporation of the Company, dated as of April 28, 1998. EXHIBIT NO. 27 Financial Data Schedule 11 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: AIRBORNE FREIGHT CORPORATION ---------------------------- (Registrant)
Date: 5/14/98 /s/Roy C. Liljebeck ------- -------------------- Roy C. Liljebeck Executive Vice President, Chief Financial Officer Date: 5/14/98 /s/Lanny H. Michael ------- ------------------- Lanny H. Michael Senior Vice President, Treasurer and Controller /TABLE EX-3 2 EXHIBIT 3 1 EXHIBIT 3 --------- RESTATED CERTIFICATE OF INCORPORATION OF AIRBORNE FREIGHT CORPORATION ------------------------------------- The following Restated Certificate of Incorporation of Airborne Freight Corporation was duly adopted by the Board of Directors of said corporation on April 28, 1998, pursuant to the provisions of Section 245 of the General Corporation Law of the State of Delaware and only restates and integrates and does not further amend the provisions of the Corporation's Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware as theretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of the Restated Certificate. The date of filing the original Certificate of Incorporation with the Secretary of State of the State of Delaware was May 10, 1968. The provisions of the original Certificate of Incorporation which named the incorporators have been omitted and certain articles and sections have been renumbered. FIRST. 1.1 The name of the corporation is AIRBORNE FREIGHT CORPORATION. SECOND. 2.1 The address of its registered office in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD. 3.1 The nature of the business 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, without par value, issuable in one or more series, and one hundred twenty million (120,000,000) shares shall be Common Stock, par value One 2 Dollar ($1.00) per share, amounting in the aggregate to 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 shares 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 the laws 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 issued; and 4.2.9 Such other terms, qualifications, privileges, limitations, options, restrictions, and special or 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 State of Delaware. Unless otherwise provided in a resolution or resolutions establishing any particular series, the aggregate number of authorized shares of Preferred Stock may be increased by an amendment of the Certificate of Incorporation approved solely by a majority vote of the outstanding shares of Common Stock (or solely with a lesser vote of the Common Stock, or solely by action of the Board of Directors, if permitted by law at the time). All shares of any one series shall be alike in every particular, except with respect to the accrual of dividends prior to the date of issuance. SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK ------------------------------------------------- 3 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 Series A Preferred Stock shall be 300,000; provided, however, that, if more than a total of 300,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of February 14, 1997, between the Corporation and The Bank of New York, a New York banking corporation, as Rights Agent (the "Rights Agreement"), 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 recorded, in accordance with the provisions of Section 103 thereof, providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Certificate of Incorporation then permits) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. Section 2. Dividends or Distributions -------------------------------------- (a) Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and 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 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) since 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 100; provided, however, that, if at any time after February 14, 1997, 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 4 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 February 14, 1997, 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 ------------------------- 5 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 6 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 7 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 IV 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 paragraph 4.2 of 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 8 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 9 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 10 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 vote 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 11 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 this clause (b)(2) shall be required to be met with respect to every class of outstanding Voting Stock, whether or 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 12 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 corporation; and (C) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (3) The consideration to be received by holders of a particular class 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 Interested 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 prior 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 Article 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 13 or has otherwise 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 corporation; provided, however, that for the purposes of the definition 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 case 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 14 quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; (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 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. 15 DATED as of the 8th day of May, 1998. AIRBORNE FREIGHT CORPORATION ---------------------------- /s/ Robert S. Cline ------------------- Robert S. Cline Chairman and Chief Executive Officer Attest: /s/ David C. Anderson --------------------- David C. Anderson Corporate Secretary/Counsel EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 22,166 0 330,411 10,290 39,387 420,827 1,877,563 955,483 1,369,453 294,344 248,993 0 0 50,682 654,736 1,369,453 0 750,193 0 692,657 0 0 3,916 53,620 21,260 32,360 0 0 0 32,360 0.65 0.63 EARNINGS PER SHARE - BASIC (IN COMPLIANCE WITH SFAS 128) EARNINGS PER SHARE - DILUTED (IN COMPLIANCE WITH SFAS 128)
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