<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Airborne Freight Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
AIRBORNE FREIGHT CORPORATION
3101 Western Avenue, P.O. Box 662
Seattle, Washington 98111
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD APRIL 25, 2000
Notice is hereby given that the annual meeting of the shareholders of
Airborne Freight Corporation, a Delaware corporation (the "Company"), has been
called and will be held on April 25, 2000, at 10:00 a.m., Seattle time, at The
Westin Hotel, 1900 Fifth Avenue, Seattle, Washington for the following
purposes:
1. To elect three directors for terms of three years.
2. To consider and vote on a proposal to approve the material terms of the
2000-2004 Executive Incentive Compensation Plan.
3. To consider and vote on a proposal to approve the Airborne Freight
Corporation 2000 Director Stock Option Plan.
4. To hear and consider reports from officers of the Company.
5. To transact such other business, including consideration of shareholder
proposals, as may properly come before the meeting and any adjournments
thereof.
The foregoing matters are described in more detail in the Proxy Statement
that is attached to this notice.
Only holders of record, as of the close of business on February 21, 2000, of
shares of Common Stock of the Company will be entitled to notice of and to
vote at the meeting and any adjournments thereof.
By order of the Board of Directors
/s/ David C. Anderson
DAVID C. ANDERSON,
Vice President,
General Counsel & Corporate Secretary
SHAREHOLDERS ARE URGED TO FILL IN, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING.
<PAGE>
PROXY STATEMENT
AIRBORNE FREIGHT CORPORATION
3101 Western Avenue, P.O. Box 662, Seattle, Washington 98111
ANNUAL MEETING OF SHAREHOLDERS, APRIL 25, 2000
Date of Mailing: March 10, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Airborne Freight
Corporation, a Delaware corporation ("Airborne" or the "Company"), for use at
the annual meeting of shareholders to be held at The Westin Hotel, 1900 Fifth
Avenue, Seattle, Washington at 10:00 a.m., Seattle time, on Tuesday, April 25,
2000, and at any adjournments thereof. Georgeson Shareholder Communications,
Inc. of New York City has been employed to solicit proxies (through
approximately 50 of its employees) by mail, telephone, or personal
solicitation, for a fee to be paid by the Company of not more than $8,000.
Officers and regular employees of the Company may solicit proxies by
telephone, telegram, and personal calls, the cost of which will be borne by
the Company.
At the annual meeting, the holders of shares of Common Stock of the Company
will (1) elect three directors for terms of three years and until their
successors have been elected and have qualified, (2) consider and vote on a
proposal to approve the material terms of the 2000-2004 Executive Incentive
Compensation Plan ("EICP"), (3) consider and vote on a proposal to approve the
Airborne Freight Corporation 2000 Director Stock Option Plan ("Director Stock
Option Plan"), (4) hear and consider reports from officers of the Company, and
(5) transact such other business, including consideration of shareholder
proposals, as may properly come before the meeting and any adjournments
thereof.
VOTING AT THE MEETING
Only holders of record, as of the close of business on February 21, 2000 of
shares of Common Stock of the Company will be entitled to notice of and to
vote at the meeting and any adjournments thereof. The Common Stock is the only
class of voting securities of the Company currently outstanding. On February
21, 2000, there were 48,763,175 shares of Common Stock outstanding (exclusive
of 2,490,526 treasury shares), all of which will be entitled to vote at the
annual meeting on April 25, 2000. At the meeting, the presence in person or by
proxy of a majority of the outstanding shares is required for a quorum.
In deciding all matters at the meeting, other than the election of
directors, each shareholder will be entitled to one vote for each share of
stock held on the record date. For the election of directors, cumulative
voting applies, so that each shareholder will have the right to vote the
number of shares owned on the record date for as many persons as there are
directors to be elected; to cumulate such shares and give one nominee as many
votes as the number of directors to be elected (three) multiplied by the
number of shares held; or to distribute such number of votes among as many
nominees and in such amounts as the holder shall determine. For shareholders
voting by proxy, provision is made on the proxy card for instructions as to
the manner of allocating votes.
1
<PAGE>
Election of the persons nominated to serve as directors requires a plurality
of all the votes cast for directors. This means that the three individuals who
receive the largest number of votes cast are elected as directors. Approval of
the material terms of the EICP, the Director Stock Option Plan and each of the
shareholder proposals requires the affirmative vote of a majority of the votes
cast by the holders of shares represented in person or by proxy at the meeting
and entitled to vote thereon.
Shareholders may withhold their vote from one or more of the nominees for
director and may abstain from voting on the EICP, the Director Stock Option
Plan and the shareholder proposals. Votes that are withheld in the election of
directors will be excluded in determining whether a nominee has received a
plurality of the votes cast. If a shareholder abstains from voting on the
proposals to approve the EICP, the Director Stock Option Plan and the
shareholder proposals, the abstention will have the effect of a vote cast
against the proposal.
Brokerage firms holding shares in street name for customers are required to
vote such shares in the manner directed by their customers. In the absence of
timely directions, firms who are members of the New York Stock Exchange will
have discretion to vote their customers' shares on election of directors and
approval of the EICP. However, the proposal to approve the Director Stock
Option Plan and the shareholder proposals are non-discretionary, and brokers
who receive no instructions from their customers will not be able to vote
those customers' shares on those proposals. Under applicable Delaware law,
such broker non-votes will have no effect on the proposal to approve the
Director Stock Option Plan and the shareholder proposals.
All shares represented by the enclosed proxy, if it is returned prior to the
meeting, will be voted in the manner specified by the shareholder. Unless a
shareholder provides specific instructions to withhold votes from, or to
allocate them to, one or more nominees for director, the persons named in the
proxy will be authorized to vote the shares represented thereby FOR the
election of the nominees for director and in their discretion to cumulate
votes and allocate them among the nominees to the extent and the manner
necessary to assure the election of all of the nominees. If any listed nominee
becomes unavailable, the persons named in the proxy may vote for any
substitute designated by the Nominating Committee of the Board; however,
management at this time has no reason to anticipate that this will occur. To
the extent specific instructions are not given with respect to approval of the
EICP and the Director Stock Option Plan, the shares represented by the proxy
will be voted FOR approval of these proposals. To the extent specific
instructions are not given with respect to the shareholder proposals, the
shares represented by the proxy will be voted AGAINST these proposals.
You may revoke your proxy at any time before it has been voted by voting in
person at the meeting, by giving written notice of revocation to the Secretary
of the Company, or by giving a later dated proxy at any time before the
voting.
2
<PAGE>
To the best of the Company's knowledge, as of February 21, 2000,
shareholders owning over 5% of the outstanding Common Stock of the Company
were as follows:
Holders of Common Stock
<TABLE>
<CAPTION>
Percentage of
Number of Common Stock
Name and Address Shares Outstanding
---------------- --------- -------------
<S> <C> <C>
Franklin Resources, Inc. 6,575,445 13.5%
777 Mariners Island Blvd.
San Mateo, California 94403-7777
Vanguard/PRIMECAP Fund, Inc. 3,400,000 7.0%
P.O. Box 2600
Valley Forge, PA 19482
Westport Asset Management, Inc. 2,966,230 6.6%
253 Riverside
Westport, CT 06880
</TABLE>
Information in this table is based on reports on Schedule 13G, or amendments
thereto, filed with the Securities and Exchange Commission.
ELECTION OF DIRECTORS
The Company's Bylaws provide for no fewer than eight and no more than twelve
directors, as determined from time to time by the Board. The Company's Board
currently consists of nine members, divided into three classes with terms
expiring at the April annual meeting as follows:
Class A (three positions with terms expiring in 2001):
Harold M. Messmer, Jr.
Mary Agnes Wilderotter
Rosalie J. Wolf
Class B (three positions with terms expiring in 2002):
Robert G. Brazier
James H. Carey
Andrew B. Kim
Class C (three positions with terms expiring in 2000):
Robert S. Cline
Richard M. Rosenberg
William Swindells
At the annual meeting, three persons will be elected to fill the Class C
positions, generally for terms of three years, to hold office until the annual
meeting of shareholders in the year their terms expire (2003) and until their
respective successors have been elected and shall have qualified as
3
<PAGE>
provided by the Bylaws. Messrs. Cline, Rosenberg, and Swindells are present
directors of the Company and have been nominated to continue as directors.
Nominees for Directors to Serve a Three-Year Term
Class C (Terms to Expire in 2003)
Robert S. Cline, age 62, Chairman and Chief Executive Officer of the Company.
Mr. Cline has served as Chairman and Chief Executive Officer of the
Company since 1984. Prior to that time, he served as Vice Chairman,
Executive Vice President, Chief Financial Officer, Senior Vice President-
Finance and Vice President-Finance. He serves as a director of Safeco
Corporation; Metricom, Inc.; and Esterline Technologies Corp. Mr. Cline, a
director of the Company since 1973, is Chairman of the Executive Committee.
Richard M. Rosenberg, age 69, Chairman and Chief Executive Officer (Retired)
of BankAmerica Corporation and Bank of America, NT&SA.
Mr. Rosenberg served as Chairman, President and Chief Executive Officer
of Bank of America from 1990 to 1996 when he retired. Mr. Rosenberg serves
as a director of BankAmerica Corporation; Northrop Grumman Corporation; and
SBC Communications. Mr. Rosenberg, a director of the Company since 1988, is
Chairman of the Compensation Committee and a member of the Executive
Committee.
William Swindells, age 69, Chairman, Willamette Industries, Inc. (forest
products).
Mr. Swindells has served as Chairman of the Board of Directors of
Willamette Industries, Inc., since 1985 and as its Chief Executive Officer
from 1985 to 1996 and from November 1997 to December 1998. He is a director
of Standard Financial Group and Oregon Steel Mills. Mr. Swindells has been
a director of the Company since 1994 and is a member of the Audit
Committee.
Continuing Directors--Not Standing for Election This Year
Class A (Terms to Expire in 2001)
Harold M. Messmer, Jr., age 54, Chairman and Chief Executive Officer, Robert
Half International, Inc. (personnel services).
Mr. Messmer has been Chairman and Chief Executive Officer of Robert Half
International, Inc., since 1987. Mr. Messmer is also a director of Health
Care Property Investors, Inc. and Spieker Properties, Inc. Mr. Messmer, a
director of the Company since 1989, serves as Chairman of the Nominating
Committee and a member of the Compensation Committee.
4
<PAGE>
Mary Agnes Wilderotter, age 45, President and Chief Executive Officer, Wink
Communications (telecommunications).
Ms. Wilderotter has been President, Chief Executive Officer and a
director of Wink Communications since January 1997. From August 1995 to
January 1997, she was Executive Vice President of National Operations for
AT&T Wireless Services, Inc., and Chief Executive Officer of Claircom, its
aviation communications division. From October 1991 to August 1995, Ms.
Wilderotter was President of the California/Nevada/Hawaii Region for McCaw
Cellular Communications, Inc. She is a director of Allied Riser
Communications Corporation; American Tower Corporation; Electric Lightwave,
Inc.; and Gaylord Entertainment. Ms. Wilderotter has been a director of the
Company since 1996 and is a member of the Nominating Committee.
Rosalie J. Wolf, age 58, Treasurer and Chief Investment Officer, The
Rockefeller Foundation.
Ms. Wolf has been Treasurer and Chief Investment Officer of The
Rockefeller Foundation since 1994. From 1989 to 1993, she was a Managing
Director at Bankers Trust. Ms. Wolf serves on the Board of Trustees of
TIAA-CREF and The Foundation Council. A director since 1999, Ms. Wolf is a
member of the Audit Committee.
Class B (Terms to Expire in 2002)
Robert G. Brazier, age 62, President and Chief Operating Officer of the
Company.
Mr. Brazier has served as President of the Company since 1978 and as
Chief Operating Officer of the Company since 1973. Prior to that time he
was Senior Vice President--Operations of the Company and Vice President of
Sales and Operations of Pacific Air Freight, Inc. Mr. Brazier has been a
director of the Company since 1974 and is a member of the Executive
Committee.
James H. Carey, age 67, Managing Director, Briarcliff Financial Associates
(private financial advisory firm).
Mr. Carey has been Managing Director of Briarcliff Financial Associates
since 1991. He served as Chief Executive Officer of National Capital
Benefits Corporation, a viatical settlement company, from March 1994 to
December 1995. Mr. Carey is a director of the S.G. Cowen Group of Mutual
Funds and the Midland Company. He has been a director of the Company since
1978 and is a member of the Compensation Committee.
Andrew B. Kim, age 63, Advisory Director, Sit/Kim International Investment
Associates, Inc. (investment company).
Mr. Kim served as President of Sit/Kim International Investment
Associates, Inc., from 1989 to 1999 when he retired. Mr. Kim is a director
of Hyundai Dragon Fund of Dublin, Ireland; Ilshin Investment Corp. and
Dong-A Venture Investment in Seoul, Korea; Asia Foods in Shanghai, China;
and the Vertical Group of New York. Mr. Kim has been a director of the
Company since 1994 and serves as Chairman of the Audit Committee and a
member of the Nominating Committee.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The full Board of Directors met five times during 1999. No incumbent member
attended fewer than 75% of the meetings of the Board of Directors and Board
committees of which he or she was a member during 1999, except Mr. Swindells
and Ms. Wilderotter.
Board Committees
The Board has a standing Audit Committee, Compensation Committee, Nominating
Committee and Executive Committee. Each committee, other than the Executive
Committee, consists exclusively of non-employee directors.
Audit Committee. The Audit Committee is currently composed of Mr. Kim,
Chairman; Mr. Swindells; and Ms. Wolf. The committee is charged with reviewing
and approving the scope of the audit of the books and accounts of the Company
and its subsidiaries, recommending the employment and retention of a firm of
independent auditors to conduct such audit, reviewing the Company's financial
reporting and control systems and reporting to the Board thereon. The
committee met twice during 1999.
Compensation Committee. The Compensation Committee is currently composed of
Mr. Rosenberg, Chairman; Mr. Carey; and Mr. Messmer. It is charged with the
review of and recommendation to the full Board on matters relating to salaries
of officers and all other forms of executive and key employee compensation and
benefits; evaluating the performance of the Chief Executive Officer;
considering, when appropriate, the appointment of a new Chief Executive
Officer and candidates for appointment to other offices; and recommending the
level and form of compensation for non-employee directors. The committee met
twice during 1999.
Nominating Committee. The Nominating Committee is currently composed of
Mr. Messmer, Chairman; Mr. Kim; and Ms. Wilderotter. It is charged with
searching for and recommending to the Board potential nominees for Board
positions. The committee met once during 1999.
Any shareholder recommendations for nominations to the Board of Directors
for consideration by the Nominating Committee for the 2001 Annual Meeting
should be forwarded to Mr. Harold M. Messmer, Jr., Chairman, Nominating
Committee, Airborne Freight Corporation, P.O. Box 662, Seattle, Washington
98111-0662, so as to be received no later than November 10, 2000.
Executive Committee. The Executive Committee currently consists of Mr.
Cline, Chairman; Mr. Brazier; and Mr. Rosenberg. It is authorized to act in
lieu of the full Board on various matters between Board meetings.
6
<PAGE>
Director Compensation
Non-employee directors received an annual fee of $22,000 in 1999 plus $1,500
for each Board and Committee meeting attended.
The Company has a Director Stock Bonus Plan ("Bonus Plan") for non-employee
directors of the Company. Under the Bonus Plan, each director receives an
annual award of shares of the Company's Common Stock having a value of $6,000
on the award date. The issuance of shares is deferred until the director
retires or otherwise ceases to be a director of the Company. The Company also
had a stock option plan for directors that expired on February 2, 1999, the
date of the last grant. The Company has proposed for shareholder approval the
Airborne Freight Corporation 2000 Director Stock Option Plan ("Director Stock
Option Plan"). The Director Stock Option Plan, like the predecessor plan,
provides each non-employee director of the Company annual grants of options to
acquire 2,000 shares of the Company's Common Stock at an exercise price equal
to the closing sales price on the New York Stock Exchange on the date of
grant. Grants were made to each non-employee director on February 1, 2000,
subject to shareholder approval.
7
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the shares of Common Stock
beneficially owned (or deemed to be beneficially owned pursuant to the rules
of the SEC) by each director of the Company, by the Chief Executive Officer
and the six other most highly compensated executive officers of the Company at
December 31, 1999 (the "named executive officers") and by all directors and
executive officers as a group:
<TABLE>
<CAPTION>
Common Stock of
the Company Percentage of
Beneficially Owned Common Stock
Name as of 2/21/00 Outstanding
---- ------------------ -------------
<S> <C> <C>
Directors
James H. Carey.......................... 12,141 /1/,/2/ *
Andrew B. Kim........................... 37,913 /1/,/2/ *
Harold M. Messmer, Jr................... 22,741 /1/,/2/ *
Richard M. Rosenberg.................... 22,741 /1/,/2/ *
William Swindells....................... 17,591 /1/,/2/ *
Mary A. Wilderotter..................... 6,715 /1/,/2/ *
Rosalie J. Wolf......................... 1,188 /2/ *
Named Executive Officers
Robert S. Cline /3/..................... 620,620 /4/ 1.3%
Robert G. Brazier /3/................... 768,264 /4/ 1.6%
John J. Cella........................... 76,946 /4/ *
Carl D. Donaway......................... 68,338 /4/ *
Kent W. Freudenberger................... 116,102 /4/ *
Roy C. Liljebeck........................ 287,851 /4/ *
Raymond T. Van Bruwaene................. 85,871 /4/ *
All Directors and Executive Officers as
a Group (16 persons)................... 2,189,292 /5/ 4.4%
</TABLE>
- --------
* Less than 1% of Common Stock outstanding.
/1/ Includes shares subject to options granted under the Directors Stock Option
Plan as follows: Mr. Carey, 10,000; Mr. Kim, 12,000; Mr. Messmer, 18,000;
Mr. Rosenberg, 18,000; Mr. Swindells, 4,000; and Ms. Wilderotter, 6,000.
/2/ Includes 741 shares (515 shares for Ms. Wilderotter and 188 shares for Ms.
Wolf) issuable under the Director Stock Bonus Plan.
/3/ Mr. Brazier and Mr. Cline also serve as directors.
/4/ Includes shares subject to options granted under the Airborne Key Employee
Stock Option Plans as follows: Mr. Cline, 315,524; Mr. Brazier, 258,100;
Mr. Cella, 42,262; Mr. Donaway, 46,770; Mr. Freudenberger, 72,376; Mr.
Liljebeck, 118,450; and Mr. Van Bruwaene, 50,000.
/5/ Includes 1,014,470 shares (inclusive of the shares mentioned in Notes 1, 2
and 4, above) subject to options or issuable under the Director Stock Bonus
Plan.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning annual and long-term
compensation paid or accrued during calendar years 1999, 1998 and 1997 for
services in all capacities to the Company by the named executive officers:
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards:
Annual ------------
Compensation Securities
Name and Principal ------------------ Underlying All Other
Position Year Salary/1/ Bonus/2/ Options/3/ Compensation/4/
------------------ ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert S. Cline 1999 $604,000 $ -- 84,000 $18,867
Chairman, Chief Executive 1998 590,346 531,311 150,000 20,931
Officer and Director 1997 541,538 866,461 56,000 24,258
Robert G. Brazier 1999 519,500 -- 57,000 14,391
President, Chief 1998 510,462 401,988 92,000 17,800
Operating Officer 1997 466,538 653,153 38,000 19,670
and Director
John J. Cella 1999 323,000 -- 24,000 13,733
Executive Vice President, 1998 319,039 166,697 40,000 17,366
International Division 1997 292,461 283,697 16,000 19,852
Carl D. Donaway 1999 323,000 -- 24,000 13,733
President & Chief 1998 319,039 189,030 40,000 17,366
Executive Officer, 1997 292,461 339,255 16,000 19,852
ABX Air, Inc.
Kent W. Freudenberger 1999 323,000 -- 24,000 13,733
Executive Vice President, 1998 319,039 198,601 40,000 17,245
Marketing Division 1997 292,461 324,632 16,000 19,852
Roy C. Liljebeck 1999 323,000 -- 24,000 13,733
Executive Vice President 1998 319,039 224,539 40,000 17,366
and Chief Financial 1997 292,461 336,330 16,000 19,852
Officer
Raymond T. Van Bruwaene 1999 323,000 -- 24,000 13,733
Executive Vice President, 1998 319,039 189,030 40,000 17,245
Field Services Division 1997 292,461 350,953 16,000 19,852
</TABLE>
- --------
/1/ The named executive officers are paid their annual base salary on a biweekly
basis. Total salary paid in different calendar years may vary depending on
the number of pay periods that fall in each year. The specific amounts shown
here reflect that 1998 had one more pay period than 1999 or 1997.
/2/ Amounts awarded under the Executive Incentive Compensation Plan or the
Executive Group Incentive Compensation Plan.
/3/ Number of shares of Common Stock underlying options awarded under the 1998
Airborne Freight Corporation Key Employee Stock Option Plan.
/4/ A portion of the amounts shown as All Other Compensation for 1999 represents
contributions by the Company to the accounts of the named executive officers
under the Company's defined contribution plan, including 401(k) matching
contributions ($4,347 for Mr. Brazier and $7,707 for each of the other named
executive officers). The balance of the amounts shown in this column for
1999 represents premiums paid on term life insurance for the named executive
officers.
9
<PAGE>
Option Grants in 1999
The following table shows information concerning stock options granted to
the named executive officers during calendar year 1999 under the Airborne
Freight Corporation 1998 Key Employee Stock Option Plan:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
----------------------------------------------- Value at Assumed
Number Percent of Annual Rates of
of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise Option Term/2/
Options Employees in Price Expiration ---------------------
Name Granted/1/ Fiscal Year (per share) Date 5% 10%
- ---- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cline 84,000/1/ 11.60% $38.125 02/02/09 $2,014,035 $5,103,960
Robert G. Brazier 57,000 7.87% $38.125 02/02/09 1,366,667 3,463,402
John J. Cella 24,000 3.31% $38.125 02/02/09 575,439 1,458,274
Carl D. Donaway 24,000 3.31% $38.125 02/02/09 575,439 1,458,274
Kent W. Freudenberger 24,000 3.31% $38.125 02/02/09 575,439 1,458,274
Roy C. Liljebeck 24,000 3.31% $38.125 02/02/09 575,439 1,458,274
Raymond Van Bruwaene 24,000 3.31% $38.125 02/02/09 575,439 1,458,274
</TABLE>
- --------
/1/ Options for the named executive officers were granted on February 2, 1999
and will become exercisable in four equal installments on February 2, 2000,
February 2, 2001, February 2, 2002 and February 2, 2003, subject to certain
contractual provisions that will apply in the event of a change in control
(see Employment Contracts). The exercise price of all options was the fair
market value of the Company's Common Stock on the date of grant.
/2/ Based upon the $38.125 per share market price on the date of grant and
assumed appreciation over the term of the options at the annual rates of
stock appreciation shown. The named executive officers will realize no value
from these options if the stock price does not increase following their
grant.
10
<PAGE>
Aggregate Option Exercises in 1999 and Year-End Option Values
The following table shows information concerning stock options exercised
during calendar year 1999 by the named executive officers and the value of
unexercised options at the end of that year:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options
Shares End at Fiscal Year-End/2/
Acquired Value ------------------------- -------------------------
Name on Exercise Realized/1/ Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cline 85,476 $1,630,123 274,154 201,000 $1,945,130 $234,500
Robert G. Brazier 35,460 1,249,965 243,990 131,500 1,967,947 159,125
John J. Cella 15,804 421,328 24,262 56,000 69,358 67,000
Carl D. Donaway 18,360 301,553 28,770 56,000 109,930 67,000
Kent W. Freudenberger 28,860 633,742 54,376 56,000 338,191 67,000
Roy C. Liljebeck 16,540 203,343 100,450 56,000 751,119 67,000
Raymond T. Van Bruwaene 19,843 470,567 32,000 56,000 139,000 67,000
</TABLE>
- --------
/1/ Represents the aggregate fair market value, on the respective dates of
exercise, of the shares of Common Stock received on exercise of options,
less the aggregate exercise price of the options.
/2/ Represents the aggregate fair market value on December 31, 1999 (based on
the closing price of $22.00 for the Company's Common Stock on the New York
Stock Exchange on that date), of the shares of Common Stock subject to
outstanding options, less the aggregate exercise price of the options.
11
<PAGE>
Comparative Performance Graph
Set forth below is a graph comparing the cumulative total shareholder return
on the Company's Common Stock with the cumulative total return of the Standard
& Poor's Composite-500 Stock Index and the Standard & Poor's Transportation
Index for the five-year period ended December 31, 1999.
Comparison of Five-Year Cumulative Total Return/1/
Among Airborne Freight Corporation Common Stock, the S&P Composite--500 Index,
and the S&P Transportation Index
[PERFORMANCE GRAPH]
December 31 1994 1995 1996 1997 1998 1999
- ----------- ---- ---- ---- ---- ---- ----
Airborne Freight Corporation $100 $131 $117 $312 $364 $223
S&P Composite-500 Index $100 $138 $169 $226 $290 $351
S&P Transportation Index $100 $139 $159 $207 $203 $183
- --------
/1/ The total return on the Company's Common Stock and each index assumes the
value of each investment was $100 on December 31, 1994 and that all
dividends were reinvested.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
It is the responsibility of the Compensation Committee to set policies
governing compensation of the Company's executive officers and to make
recommendations to the Board as appropriate. These policies cover base
salaries, incentive compensation, stock options, and any other forms of
remuneration. In addition, the Committee evaluates performance of management,
considers management succession, and deals with other personnel matters related
to senior management.
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The Company has designed pay programs for executive officers that provide a
strong link between the Company's performance and executive compensation. Each
component of executive pay is weighted and valued so that, in total, highly
talented executives can be attracted, retained and motivated to consistently
improve the performance of the Company.
Each year, the Committee reviews the total compensation of the Chief
Executive Officer and the other executive officers. The Committee also
monitors general compensation practices of all other officers of the Company
and its subsidiaries. To assist in these duties, the Committee periodically
retains the services of a compensation consulting firm to provide information
on the competitiveness of compensation paid to executive officers of the
Company compared to that of other companies of similar size and scope.
A consulting firm was retained to obtain such information in 1999. The firm
reviewed compensation paid by national transportation and general industry
companies. Annual revenues of the comparison companies were approximately $3.1
billion.
The Company compensates its executive officers through a combination of base
pay, annual awards and longer term incentives. The Committee considers how the
mix of base salaries and annual awards compares to the median compensation
level of the comparison companies, but does not target such compensation at,
above, or below the median level. The Committee believes that total
compensation potentially available to Company executive officers is
competitive and provides the incentive necessary to motivate them to meet or
exceed goals set by the Board.
The compensation of the Chief Executive Officer and the other executive
officers was reviewed during 1999 based on their performance and
responsibilities and was adjusted as deemed appropriate by the Committee.
During 1999 the executive officers had the potential to receive annual
awards under the Company's incentive compensation plans. In connection with
these plans, the Committee approved an annual operating plan at the beginning
of 1999 that established targets for pre-tax net profits and revenue growth.
In addition certain executive officers were assigned individual objectives.
Annual awards under the plans are calculated as a percentage of base salary.
The threshold for awards is attainment of 80% of the targets and the maximum
payout is available at 150% target attainment. However, regardless of revenue
growth and individual objectives, no awards are made unless the Company earns
at least 80% of the targeted level of pre-tax net profit. In 1999 the Company
did not achieve the threshold for pre-tax net profits. Accordingly, no
incentive awards were paid.
The Committee considers the desirability of granting longer-term incentive
awards to the Company's officers, including the executive officers, under the
Company's stock option program. In deciding the number of options to grant,
the Committee considers the anticipated value of the options, the number of
options outstanding or previously granted to the executives, and the aggregate
number of grants to all employees of the Company. In 1999, stock options were
granted to executive officers at an exercise price equal to the fair market
value of the Company's stock on the date of grant. The Committee believes that
these awards will have the desired effect of
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focusing the Company's senior management on building consistent profitability
and shareholder value, since the awards directly ally the interests of
management with an increase in the market price of the Company's stock.
Under Federal income tax rules, the deduction for certain types of
compensation paid to the Chief Executive Officer and four other most highly
compensated officers of publicly held companies is limited to $1 million per
employee. In certain circumstances, performance based compensation is exempt
from the $1 million limit. The Committee believes all compensation earned by
the Company's executive officers in 2000 will be deductible.
Richard M. Rosenberg, Chairman
James H. Carey
Harold M. Messmer, Jr.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is currently composed of Mr. Rosenberg, Chairman,
Mr. Carey and Mr. Messmer. Mr. Rosenberg is a director of BankAmerica
Corporation, the parent of Bank of America. The Company has various demand
deposit accounts, and participates in a credit agreement with Bank of America.
Retirement Plans
The Company maintains two qualified retirement plans that cover the named
executive officers and all other employees (other than certain union
employees) who satisfy certain eligibility requirements relating to minimum
age, length of service and hours worked. One of the plans is a defined
contribution plan and the other is a defined benefit pension plan. The Company
also maintains a nonqualified supplemental plan for its officers, including
the named executive officers.
Defined Contribution Plan. The Company's defined contribution plan includes
a profit sharing plan that provides for an annual discretionary contribution
which, pursuant to resolutions of the board, is currently equal to 7% of pre-
tax profits up to a predetermined level, plus 14% of pre-tax profits in excess
of that level. Each participant's account under the plan is credited with a
portion of such contribution based on the ratio of his or her salary to the
total salaries of all participating employees. At retirement, a participant's
targeted annual pension benefit under the Company's defined benefit pension
plan will be offset based on the amount in the participant's profit sharing
account (see Defined Benefit Pension Plan). The defined contribution plan also
includes a voluntary 401(k) salary deferral plan.
Defined Benefit Pension Plan. Subject to the offset described below and
statutory limits on benefits that may be provided under such a plan, the
defined benefit pension plan provides each participant with a targeted annual
pension benefit at retirement equal to (i) the number of years of service of a
participant (up to a maximum of 25 years), times (ii) the sum of 1.6% of the
participant's final average earnings up to the average covered Social Security
earnings level, plus 2% of the portion of the final average earnings that
exceeds that level.
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A participant's benefit under the Company's defined benefit pension plan is
subject to an offset based on the amount in his or her profit sharing account
under the defined contribution plan. This is done as follows: At retirement,
the Company calculates how much of a participant's targeted annual pension
benefit can be provided by the amount that has accumulated in his or her
profit sharing plan account. This calculation is based on an interest rate
factor as described in the pension plan. The defined benefit pension plan then
provides the portion of the targeted annual pension benefit, if any, that the
amount in the profit sharing account is insufficient to provide.
Supplemental Plan. The Company also maintains a Supplemental Executive
Retirement Plan (the "SERP") for the benefit of officers of the Company and
its eligible subsidiaries. The SERP is a nonqualified plan that, in
conjunction with the Company's qualified retirement plans and Social Security,
is designed to provide a retirement benefit equal to approximately 65% of an
officer's final average earnings (the SERP also provides for benefit payments
upon the occurrence of other events, including in certain cases a change in
control of the Company). The benefit accrues in equal annual increments over a
period of 15 years. The SERP provides for normal retirement at or after age
62; however, the benefits will be subject to offset based on retirement
benefits the officer will receive under the Company's qualified retirement
plans and Social Security (the offset is calculated based on normal retirement
at age 65) and under the retirement plans of any prior employer. The SERP is
unfunded, although the Company maintains commingled investment fund assets
that could be used to fund eventual benefit payments.
The following table sets forth the targeted annual pension benefits
(calculated on the basis of a straight life annuity) payable upon retirement
at age 65 to the Company's officers (including the named executive officers)
based on specified years of service and levels of compensation. The amounts
shown take into account Social Security offsets based on the career average
Social Security wage base in effect in 1999. The amounts shown do not reflect
any offsets that may apply in individual cases on account of benefits under
the retirement plans of an officer's prior employer.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- ------------ - -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 26,857 $ 70,191 $113,524 $113,524 $113,524 $113,524 $113,524
300,000 48,524 113,524 178,524 178,524 178,524 178,524 178,524
400,000 70,191 156,857 243,524 243,524 243,524 243,524 243,524
500,000 91,857 200,191 308,524 308,524 308,524 308,524 308,524
600,000 113,524 243,524 373,524 373,524 373,524 373,524 373,524
700,000 135,191 286,857 438,524 438,524 438,524 438,524 438,524
800,000 156,857 330,191 503,524 503,524 503,524 503,524 503,524
900,000 178,524 373,524 568,524 568,524 568,524 568,524 568,524
1,000,000 200,191 416,857 633,524 633,524 633,524 633,524 633,524
1,100,000 221,857 460,191 698,524 698,524 698,524 698,524 698,524
</TABLE>
Remuneration is calculated based on average annual compensation in the five
highest consecutive years of the ten years prior to retirement. Based on
compensation through December 31, 1999, the final average earnings of the
named executive officers were as follows: Mr. Cline, $851,186;
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Mr. Brazier, $701,494; Mr. Liljebeck, $417,305; Mr. Van Bruwaene, $413,128;
Mr. Freudenberger, $409,778; Mr. Donaway, $402,804 and, Mr. Cella $395,208.
All of the named executive officers have accrued at least 20 years of service.
Employment Contracts
Each of the named executive officers is elected annually and serves at the
pleasure of the Board, subject, however, to agreements with the Company that
generally assure that, in the event of a change in control of the Company, all
of the officers will have the right to remain employed, at not less than the
respective rates of compensation in effect as of the date of the change in
control, for at least three years thereafter.
The agreements with the named executive officers generally provide that, if
an officer is terminated without "cause" (defined as willful and continued
failure to perform duties after demand from the Board, or willful and gross
misconduct) within three years after a change in control, the Company must pay
the officer, in addition to all accrued compensation, the equivalent of three-
years' salary, bonus and other benefits. Also under the agreements, an officer
terminated after a change in control may elect to receive cash equal to the
difference between the exercise price of all stock options held by the officer
(whether or not then exercisable) and the market value of the stock on the
date of termination, or the highest price per share actually paid in
connection with any change in control of the Company, whichever is higher. In
the absence of this provision, under the Company's stock option plans, an
employee terminated other than for cause has three months to exercise any
options exercisable on the date of termination but any options not then
exercisable are canceled. The Airborne Freight Corporation 1998 Key Employee
Stock Option Plan provides that all outstanding options become exercisable
upon retirement and expire three years after the date of retirement unless
their terms expire sooner. The Company is required to provide the same
additional compensation and benefits described above in the event a named
executive officer resigns due to failure of the Company, after a change in
control, to provide the salary, other specific benefits and terms of
employment required by the agreement.
In return for the benefits under the agreements described above, each of the
named executive officers has agreed, among other things, not to serve as an
executive officer, director or consultant to any competitor of the Company for
at least one year after termination of employment with the Company. While
these contracts were designed to encourage these officers to stay with the
Company, and not to deter changes in control, it is possible that a party
wishing to obtain control of the Company with the intention of replacing
incumbent management could be influenced by the additional cost that the
Company would incur under these contracts.
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PROPOSAL 2
PROPOSAL FOR APPROVAL OF 2000-2004
EXECUTIVE INCENTIVE COMPENSATION PLAN
The Board has adopted the 2000-2004 Executive Incentive Compensation Plan
("EICP") subject to shareholder approval. The EICP provides for annual cash
bonuses to certain executives of the Company and its subsidiaries for each of
calendar years 2000 through 2004. Shareholder approval of the material terms
of the EICP is sought in an effort to assure the deductibility by the Company
of cash compensation that may be paid under it.
Under current tax legislation and implementing Treasury regulations,
compensation to the chief executive officer and four other most highly
compensated officers of a publicly traded corporation in excess of one million
dollars in any one year will not be deductible for Federal income tax purposes
unless such compensation is performance-based (as defined in the regulations)
or is otherwise exempt from such limits on deductibility. To fall within the
performance-based compensation exemption, the shareholders must approve the
material terms of the EICP, which include the eligible participants, the
performance goal or goals, and the maximum amount payable thereunder.
The following employees are eligible for awards under the EICP: Chairman of
the Board, Chief Executive Officer, President, Chief Operating Officer, Senior
Executive Vice Presidents, Executive Vice Presidents, Chief Financial Officer,
Division Heads, Chief Executive Officer of ABX Air, Inc. (the Company's wholly
owned airline subsidiary), and President of ABX Air, Inc. Currently, seven
employees of the Company are designated for participation under the EICP.
Payments under the EICP are determined based upon achievement of
predetermined performance goals. Allowable performance goals under the EICP
are pre-tax, pre-profit sharing net profit, sales revenue growth, earnings per
share, shipment growth, increase in stock price, return on assets and return
on equity.
The EICP is administered by the Compensation Committee. The Compensation
Committee sets annual targets for performance goals within 90 days after the
beginning of each year. Achievement of performance goals is determined on an
annual basis following the end of the year.
Payments are calculated as a percentage of base salary. The threshold for
awards is attainment of 80% of the targets and the maximum payout is awarded
at 150% target attainment.
The maximum annual award that any employee may receive under the EICP is
$1,500,000. The maximum award that the highest compensated eligible employee,
the Chief Executive Officer, may receive for 2000, assuming his base salary is
unchanged for the year, is $1,000,000. The Compensation Committee has the
discretion to decrease or eliminate awards, but may not increase awards.
The EICP is not exclusive and does not limit authority of the Board or the
Compensation Committee with respect to other compensation. The Board may
terminate the EICP at any time.
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<PAGE>
PROPOSAL 3
PROPOSAL FOR APPROVAL OF
DIRECTOR STOCK OPTION PLAN
By resolution at its meeting on February 1, 2000, the Board of Directors
adopted and recommended for shareholder approval the Airborne Freight
Corporation 2000 Director Stock Option Plan ("Director Stock Option Plan"). To
become effective, a majority of the votes cast on the proposal to approve the
plan must be for such approval.
A summary of the plan follows. The complete text is included as an addendum
to this Proxy Statement.
The purpose of the plan is to enable the Company to attract and retain
outside persons of the highest caliber to serve on the Company's Board of
Directors. The plan seeks to achieve this purpose by means of automatic grants
of stock options to non-employee directors of the Company. Grants under the
plan occurred on February 1, 2000, but the effectiveness of the grants was
conditioned upon approval of the plan by the shareholders. If the plan is
approved, additional grants will occur on the first Tuesday in February of
each succeeding year, through and including February 3, 2009. The exercise
price per share will be the closing sales price of a share of the Company's
Common Stock on the New York Stock Exchange on the grant date. The maximum
number of shares of Common Stock that may be issued upon exercise of options
granted under the plan is 200,000, all of which will be issued using treasury
shares.
In order to be eligible for a grant on the specified grant date in an
particular year, an individual must be a member of the Company's Board of
Directors on that date, and, in addition, the individual must not have been an
employee of or consultant to the Company or any of its direct or indirect
subsidiaries at any time during the year of the grant or the preceding
calendar year. If both of these conditions are met, the individual will
receive a grant of an option to acquire 2,000 shares of the Company's Common
Stock.
Each option granted to an eligible director may be exercised in whole or in
part at any time after its grant and before it expires, which will be ten
years following its grant date or one year following the death of the
director, whichever occurs first. The exercise price is payable in full upon
exercise, in either cash or Common Stock of the Company. Shares of Common
Stock of the Company used to pay the exercise price will be valued based on
the closing sales price of a share of Common Stock on the New York Stock
Exchange on the date the option is exercised. An option is transferable to
certain permitted transferees and otherwise is not transferable except by will
or the laws of descent and distribution.
In general, the grant of an option to a director will not have any tax
consequences to either the director or the Company. Upon exercise of the
option, the director will be required to report, on his or her federal income
tax return for the year in which the exercise occurs, additional compensation
income equal to the difference between the fair market value of the stock at
the time of exercise and the exercise price at which the stock was acquired.
At the same time, the Company will generally be entitled to a tax deduction
equal to the amount included in income by the director (assuming that this
constitutes reasonable compensation).
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<PAGE>
If approved by the shareholders, the plan would be effective retroactive to
February 1, 2000, the first grant date under the plan. On that date, seven of
the Company's current directors were eligible to receive, and did receive,
subject to shareholder approval of the plan, grants of options to purchase an
aggregate of 14,000 shares of the Company's Common Stock at an exercise price
of $18.94 per share. If an individual director who received one of these
grants were to remain on the Board of Directors through February 3, 2009 (the
final grant date under the plan), he or she during this period would be
eligible to receive, and would receive, grants of options to purchase a total
of 20,000 shares of Common Stock.
The number of shares that can be purchased on exercise of options granted or
to be granted to directors under the plan will be subject to adjustments in
connection with any material alteration in the capital structure of the
Company on account of a merger, reorganization, recapitalization, or other
similar event. The Board of Directors may at any time discontinue the plan as
to future grants of options and may also generally amend the plan in any
respect, subject to certain limitations.
PROPOSAL 4
SHAREHOLDER PROPOSAL
TO DECLASSIFY THE BOARD OF DIRECTORS
The Teamsters General Fund, International Brotherhood of Teamsters, 25
Louisiana Avenue, N.W., Washington, DC 20001, owner of 160 shares, submitted
this proposal. In accordance with applicable proxy regulations, the proposed
resolution and supporting statement, for which the Board of Directors and the
Company accept no responsibility, are set forth below.
Shareholder Resolution
RESOLVED: That Airborne Express' stockholders urge the Board of Directors
take the necessary steps, in compliance with state law, to declassify the
Board for the purpose of director elections. The board declassification shall
be completed in a manner that does not affect the unexpired terms of directors
previously elected.
Proponent's Supporting Statement
Airborne Express' board is divided into three classes of directors serving
staggered three-year terms. This means an individual director faces election
only once every three years, and shareholders only vote on roughly a third of
the board each year.
Companies often defend classified boards by suggesting that they preserve
continuity. We think continuity is insured through director re-elections. When
directors are performing well they routinely are re-elected with majorities of
95%.
We believe that annual elections can pave the way for improved board
sensitivity to important shareholder issues. In particular, it can help speed
the diversification of Airborne Express' board and introduce new perspectives.
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In addition, a declassified board allows the company to respond quickly to
changes by giving the board the ability to appoint more qualified candidates
each year. A declassified board can help give Airborne Express the flexibility
it needs as it moves into the next century.
Generally, shareholders have grown hostile to classified boards. This is
especially important for employee shareholders. In 1999, shareholders voted to
declassify boards with a majority at Cendant, Cooper Tire & Rubber, Kaufman &
Broad Home, Oregon Steel and Tenneco. In 1998, Walt Disney Company agreed to
change the by-laws after the resolution passes with 65% of the vote. At
Fleming and Eastman Kodak more than 70% of shareholders voted to declassify
the board.
By adopting annual elections, Airborne Express can demonstrate its
commitment to fuller accountability to shareholders, accountability that
honors shareholder prerogatives.
We urge you to vote YES for this proposal.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE AGAINST PROPOSAL 4
The Company's Board of Directors is divided into three classes with
directors elected to staggered three-year terms. The Company adopted its
classified board as a result of a majority vote of all outstanding shares at
its 1982 annual meeting. The Board believes board classification continues to
serve the best interests of the Company's shareholders.
The Board believes classification provides stability in its composition and
long-range planning. A classified board ensures that a majority of the Board
will have prior experience as directors of the Company. A Board with a
historical perspective of the Company is better positioned to make the
fundamental decisions that are best for the Company and its shareholders. This
enables the directors to build on past experience and plan for a reasonable
period in the future. The annual election of one-third of the Board also helps
to prevent abrupt changes in corporate policies that might result if the
entire Board were elected each year.
The Board also believes that a classified board reduces the ability of a
third party to effect a sudden, unsolicited change in the Company's direction.
It allows the Board to fulfill its duties to the shareholders by providing an
opportunity to negotiate with the proponent of change, consider alternatives
and seek the best results for all shareholders.
The Board disagrees with any suggestion that the timing of elections of
directors affects its attention to the issues facing the Company. Shareholders
have the opportunity annually to vote against one-third of the directors as a
way of expressing any dissatisfaction with the Board or management. A majority
of the Board can be replaced in the course of two annual meetings, all held
within approximately one year.
The Board recognizes that some shareholders oppose board classification.
Nevertheless, classified boards reportedly remain a feature of corporate
governance at a majority of S&P 500 companies. The shareholder proposal for
board declassification at the Company's 1999 annual meeting received support
from less than half of the outstanding shares.
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Approval of this proposal would require the affirmative vote of a majority
of the shares represented in person or by proxy at the meeting and entitled to
vote. However, approval of the proposal would not automatically eliminate the
classified board, as this proposal is only a recommendation. Eliminating the
classified board would require action by the Board to amend the Company's
Certificate of Incorporation and Bylaws, which provide for a classified board.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST PROPOSAL 4.
PROPOSAL 5
SHAREHOLDER PROPOSAL
TO HAVE ONE INDEPENDENT DIRECTOR WITH FIVE YEARS OF AIRLINE
FLIGHT-OPERATIONS MANAGEMENT EXPERIENCE
W. Richard Ziebarth, 242 Hopewell Court, Powell, OH 43065, owner of 150
shares, submitted this proposal. In accordance with applicable proxy
regulations, the proposed resolution and supporting statement, for which the
Board of Directors and the Company accept no responsibility, are set forth
below.
Shareholder Resolution
RESOLVED: One director to have airline industry experience. Recommend that
the Company adopt all necessary governing documents for the policy that the
board must have at least one independent director with 5 years of significant
airline flight-operations management experience.
If at any time the board does not have a director with these qualifications,
then the Company will nominate a director with these qualifications in the
proxy statement at the next shareholder meeting. The Company will give this
director nominee the same qualification presentation format in the proxy
statement as all other director nominees.
A director is deemed independent if his or her only non-trivial
professional, financial or familial connection to the Company or its CEO
within the past 10 years is his or her directorship.
Proponent's Supporting Statement
The board currently has no director with significant industry experience and
has not had a director with significant industry experience for 10 years. This
puts the Company at a competitive disadvantage since its competitors benefit
from directors with industry experience. The perspective of an independent
director with industry experience is a resource that the board and management
should welcome.
In today's increasingly competitive environment and advanced technology,
there is a greater need for direct communication of industry experience to the
boardroom. The board needs one member to give an informed oversight of
management's response to the highly technical and
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regulatory environment in which the Company operates. The flight-operations
challenges facing management are well stated in the Company's March 29, 1999
10-K report:
"The Federal Aviation Administration 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."
A director with industry experience will be a source of significant value to
ensure the Company's future success. It behooves the board to include a
director experienced with the specific challenges facing this industry to make
our Company more competitive.
Adding an industry-experienced director is facilitated by current Airborne
by-laws authorizing a 12 member board with only 9 seats currently filled.
What issues highlight concern about improving Airborne's performance?
"We remain concerned that the Company has not been able to identify the
reason for the lack of volume growth," said Mary Fleckenstein of Ragen
MacKenzie brokerage, before Airborne's latest earnings warning Wednesday, "and
therefore has not been able to identify initiatives to restore its domestic
growth rate."
Seattle Times July 11, 1999
The best boards continue to raise the bar, said Business Week.
Vote yes for:
ONE DIRECTOR TO HAVE AIRLINE INDUSTRY EXPERIENCE
YES ON 5
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE AGAINST PROPOSAL 5
The Board of Directors of the Company currently consists of nine directors,
seven of which are independent. The Board believes its members have the
breadth and depth of experience necessary to effectively guide operations of
the Company.
Effective management of the Company requires expertise in all facets of the
Company's business. The Board believes current management is well qualified in
all necessary areas, including airline flight operations. In view of the
expertise of management and the Company's current excellent performance in
airline flight operations, the Board does not believe it necessary or
advisable to adopt a policy requiring appointment of a director with airline
flight operations management experience.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST PROPOSAL 5.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that certain of the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities,
file reports of ownership and changes of ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten percent shareholders are required by SEC regulation to
furnish the Company with copies of all such forms they file.
Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and
directors regarding their compliance with the filing requirements, the Company
believes that, in 1999, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with.
SHAREHOLDER PROPOSALS
The Company's 2001 Annual Meeting of Shareholders is scheduled to be held on
April 24, 2001. Proposals of shareholders intended to be presented at the 2001
Annual Meeting must be received by the Company on or prior to November 10,
2000, to be eligible for inclusion in the Company's Proxy Statement and form
of proxy to be used in connection with the 2001 Annual Meeting.
A shareholder of record who intends to submit a proposal at the 2001 Annual
Meeting that is not eligible for inclusion in the Proxy Statement, or who
intends to submit one or more nominations for directors at the meeting, must
provide prior written notice to the Company. The notice should be addressed to
the Secretary and received at the Company's principal executive offices not
later than January 24, 2001 for proposals and not later than February 14, 2001
for director nominations. The written notice must satisfy certain requirements
specified in the Company's Bylaws. A copy of the Bylaws will be sent to any
shareholder upon written request to the Company's Secretary.
OTHER MATTERS
Management is not aware at this time that any other matters are to be
presented for action at this meeting. If other matters come before the
meeting, the persons named in the enclosed proxy form will vote all proxies in
accordance with their best judgment unless the shareholder has indicated on
the proxy card that the shares represented thereby are not to be voted on such
other matters. No action will be required of shareholders regarding reports of
officers.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY AND THAT YOUR SHARES BE
REPRESENTED. SHAREHOLDERS ARE URGED TO FILL IN, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
March 10, 2000
Seattle, Washington
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ADDENDUM TO AIRBORNE FREIGHT CORPORATION PROXY STATEMENT
2000 DIRECTOR STOCK OPTION PLAN
AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Company"), hereby
establishes and sets forth the terms of the Airborne Freight Corporation 2000
Director Stock Option Plan (the "Plan").
1. Definitions. Capitalized terms used in the Plan have the meanings given
those terms in the attached Appendix A or in the section of the Plan
referenced therein.
2. Purpose of Plan. The purpose of the Plan is to assist the Company in
attracting and retaining outside directors of the highest caliber to serve on
the Board. The Plan seeks to achieve this purpose by providing for automatic
grants of Options to certain outside directors on each Annual Meeting Date and
at certain other times.
3. Administration of the Plan. The Board shall have full power and
authority, subject only to the provisions of the Plan (a) to administer or
supervise the administration of the Plan; (b) to interpret the provisions of
the Plan and the agreements evidencing Options; (c) to correct any defect,
supply any information and reconcile any inconsistency in such manner and to
such extent as it determines to be necessary or advisable to carry out the
purpose of the Plan; and (d) to take such other actions in connection with the
Plan as it determines to be necessary or advisable. The Board is authorized to
adopt, amend and rescind such rules, regulations and procedures not
inconsistent with the provisions of the Plan as it determines to be necessary
or advisable for the proper administration of the Plan, and each Option shall
be subject to all such rules, regulations and procedures (whether the Option
was granted before or after adoption thereof). Each action and determination
made or taken by the Board, including but not limited to any interpretation of
the Plan and the agreements evidencing Options, shall be final, conclusive and
binding for all purposes and upon all persons. The Board shall have all powers
necessary or appropriate to accomplish its duties under the Plan.
4. Shares Available for Options. The aggregate number of shares of Common
Stock reserved for issuance upon exercise of Options granted under the Plan
will be two hundred thousand (200,000) (subject to Section 9 and Section 10),
and Options may be granted under this Plan only with respect to the shares so
reserved. If an Option terminates for any reason without having been exercised
in full, the shares of Common Stock for which the Option has not been
exercised shall again be available for purposes of the Plan.
5. Grants of Options
5.1 Effective on February 1, 2000, and on the first Tuesday in February
of each succeeding year through and including February 3, 2009 (each such
date will be referred to as a "Grant Date"), each individual who is an
Eligible Director on the Grant Date will receive an Option (an "Option") to
acquire two thousand (2,000) shares of Common Stock; provided, however, if
there are insufficient Available Shares for the grant of the Options as
provided above, each such Eligible Director shall instead receive an Option
to acquire the largest whole number of shares of Common Stock as can then
be granted to all of the Eligible Directors without exceeding the Available
Shares.
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5.2 Each grant of an Option shall occur automatically without further
action of the Board other than, to the extent necessary, its determination
of any provisions that are to be included in the agreement evidencing the
Option pursuant to Section 8.1.
6. Purchase Price. The price at which each share of Common Stock may be
purchased upon exercise of an Option shall be the Fair Market Value of the
Common Stock on the Grant Date. The purchase price shall be paid in full at
the time of exercise (a) in cash, (b) by means of a transfer to the Company of
shares of Common Stock that have been outstanding for at least six (6) months
and that have a Fair Market Value on the date of exercise equal to the
purchase price to be paid, or (c) a combination of cash and shares of Common
Stock.
7. Other Terms of Options
7.1 Each Option will be immediately exercisable for all of the shares of
Common Stock covered thereby.
7.2 Unless it terminates earlier under other provisions of this Plan,
each Option granted to an Eligible Director will terminate on the tenth
(10th) anniversary of its Grant Date or one (1) year following the demise
of the Eligible Director, whichever occurs earlier.
8. Option Agreement; Transfer of Options; Certificates
8.1 Each Option will be evidenced by a written agreement executed by the
Company and the Eligible Director. Such agreement shall contain the terms
of the Option as specified in this Plan, together with such other
provisions not inconsistent with such terms as the Board determines.
8.2 An Eligible Director may transfer an Option to any Permitted
Transferee, so long as the transfer is without value, and the Permitted
Transferee may transfer the Option without value to any other Permitted
Transferee of the Eligible Director. Neither (a) a transfer under a
domestic relations order in settlement of marital property rights, nor (b)
a transfer to an entity in which more than fifty percent (50%) of the
voting interests are owned by Permitted Transferees (or the Eligible
Director) in exchange for an interest in that entity, will constitute a
transfer for value. Except as expressly permitted by this Section 8.2, an
Option will not be transferable by its holder other than by will or by the
laws of descent and distribution, will not be involuntarily alienable by
legal process or otherwise by operation of law, and will be exercisable
during the holder's lifetime only by the holder. If the holder of an Option
dies prior to its full exercise, the Option may be exercised, to the extent
it does not thereby terminate, by the person or persons to whom the rights
of the holder under the Option pass by will or by applicable laws of
descent and distribution.
8.3 Each certificate evidencing Common Stock issued upon exercise of an
Option shall bear any legends that the Company, upon advice of legal
counsel, determines to be necessary or appropriate.
9. Adjustments Upon Certain Changes in Capitalization. If the Company
subdivides its outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock dividend, stock split, reclassification or
otherwise) or combines its outstanding shares of Common Stock into a smaller
number of shares of Common Stock (by reverse stock split,
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reclassification or otherwise), or if the Board determines, in its sole
discretion, that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock, or other similar corporate event (including any merger or
consolidation other than one that constitutes an Approved Transaction) affects
the Common Stock in such a manner that it is advisable to make adjustments
pursuant to this Section 9, then the Board shall, in its sole discretion and
in such manner as the Board may deem equitable and appropriate (a) adjust the
number and/or kind of shares or securities covered by each Option outstanding
at the time of such event and the purchase price of such shares or securities,
(b) make a corresponding adjustment to the number and/or kind of shares or
securities reserved under Section 4 for issuance upon exercise of such
outstanding Options, and (c) adjust the number and/or kind of shares or
securities as to which Options will thereafter automatically be granted under
the Plan.
10. Approved Transaction. If an Approved Transaction occurs, the Board shall
have the power to determine what effect, if any, the Approved Transaction
shall have upon each outstanding Option, including, without limitation the
power:
(a) To cause the Option to terminate upon consummation of the Approved
Transaction;
(b) To make, or cause another party to the Approved Transaction to make,
appropriate provision for continuation of the Option, or for replacement of
the Option with a new award on terms that are, as nearly as practicable,
the financial equivalent of the Option; and/or
(c) To deliver, or cause another party to the Approved Transaction to
deliver, to the holder of the Option equity securities of the Company or
another party to the Approved Transaction having a value equal to the value
of the Option at the time of consummation of the Approved Transaction.
11. Amendment; Termination
11.1 The Board may from time to time amend the Plan in any respect
whatsoever; provided, however, that no amendment may have any material
adverse effect on the rights of any holder of any Option granted prior to
the amendment, unless the holder consents thereto.
11.2 The Board may terminate the Plan at any time. No Options shall be
granted following termination of the Plan, but the provisions of the Plan
shall continue in effect until all Options terminate or are exercised in
full and all rights of all persons with any interest in the Plan expire.
12. Condition to Effectiveness of the Plan. The Plan was adopted by the
Board on February 1, 2000. The effectiveness of the Plan is conditioned upon
approval of the Plan by the stockholders of the Company at the annual meeting
of the stockholders of the Company scheduled to be held on April 25, 2000. The
approval required shall be a majority of the shares cast on the proposal to
approve the Plan. The grants of Options on February 1, 2000, are expressly
conditioned on satisfaction of the foregoing condition, and prior thereto no
Eligible Director shall have any right to exercise any Option so granted. If
the Plan is not so approved, the Plan and all prior conditional grants of
Options to Eligible Directors shall automatically be void.
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13. Governing Law. Except as to corporate matters governed by the General
Corporation Law of the State of Delaware, all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Washington
and construed accordingly.
APPENDIX A
DEFINITIONS
"Affiliate" of the Company means any corporation, partnership, or other
business association that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with
the Company.
"Approved Transaction" means any of the following transactions consummated
with the approval, recommendation or authorization of the Board:
(a) any merger, consolidation, statutory or contractual share exchange,
or other transaction to which the Company or any of its Affiliates or
stockholders is a party if, immediately following the transaction, the
persons who held Common Stock (or securities convertible into Common Stock)
immediately prior to the transaction hold less than a majority of the
combined Common Equity of the Company (or if, pursuant to the transaction,
shares of Common Stock are changed or converted into or exchanged for, in
whole or part, securities of another corporation or entity, the combined
Common Equity of that corporation or entity);
(b) any liquidation or dissolution of the Company; and
(c) any sale, lease, exchange or other transfer not in the ordinary
course of business (in one transaction or a series of related transactions)
of all, or substantially all, of the assets of the Company.
"Available Shares" means the number of shares of Common Stock from time to
time available under Section 4 for the grant of Options under this Plan.
"Board" means the Board of Directors of the Company.
"Common Equity" means the capital stock of a corporation (or corresponding
securities of a noncorporate entity) ordinarily, and apart from rights
accruing under special circumstances, having the right to vote in an election
for directors (or for members of the governing body of the noncorporate
entity).
"Common Stock" means the Common Stock, par value $1.00 per share, of the
Company.
"Company" is defined in the preamble of the Plan.
"Eligible Director" means each individual who on a Grant Date meets the
following requirements:
(a) The individual is a member of the Board at the close of business on
the Grant Date; and
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(b) At no time during the calendar year in which the Grant Date falls or
the preceding calendar year has the individual been an employee of or
consultant to the Company or any of its direct or indirect subsidiaries.
"Fair Market Value" for the Common Stock (or any other security) on any day
means, if the Common Stock (or other security) is publicly traded, the last
sales price (or, if no last sales price is reported, the average of the high
bid and low asked prices) for a share of Common Stock (or unit of the other
security) on that day (or, if that day is not a trading day, on the next
preceding trading day), as reported by the principal exchange on which the
Common Stock (or other security) is listed, or, if the Common Stock (or other
security) is publicly traded but not listed on an exchange, as reported by The
Nasdaq Stock Market, or, if such prices or quotations are not reported by The
Nasdaq Stock Market, as reported by any other available source of prices or
quotations selected by the Board. If the Common Stock (or other security) is
not publicly traded, or if the Fair Market Value is not determinable by any of
the foregoing means, the Fair Market Value on any day shall be determined in
good faith by the Board on the basis of such considerations as the Board deems
appropriate.
"Grant Date" is defined in Section 5.1.
"Option" is defined in Section 5.1.
"Permitted Transferee" of an Eligible Director means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law of the Eligible Director (including any such
relative by adoption); any person sharing the Eligible Director's household
(other than a tenant or employee); a trust in which these persons have more
than fifty percent (50%) of the beneficial interest; and any other non-
charitable entity in which these persons (or the Eligible Director) own more
than fifty percent (50%) of the voting interests.
"Plan" is defined in the preamble hereof.
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v Please Detach Proxy Card Here v
________________________________________________________________________________
Please Detach Proxy Card Here
You Must Detach This Portion of the Proxy Card
v Before Returning it in the Enclosed Envelope v
________________________________________________________________________________
[ ]
1. ELECTION OF DIRECTORS - Class C (Term to expire 2003)
FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
listed below. [X] for all nominees listed below. [X] [X]
Nominees: Robert S. Cline, Richard M. Rosenberg, William Swindells
INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike out the nominee's name above. If you desire
to cumulate your votes for any individual nominee(s), write your instruction,
as to number of votes cast for each, on the space provided below. The total
must not exceed three times the number of shares you hold.
- --------------------------------------------------------------------------------
2. To approve the material terms of the 2000-2004 Executive Incentive
Compensation Plan.
FOR [X] AGAINST [X] ABSTAIN [X]
3. To approve the Airborne Freight Corporation 2000 Director Stock Option Plan.
FOR [X] AGAINST [X] ABSTAIN [X]
4. To approve the shareholder proposal to declassify the Board of Directors for
the purpose of director elections. Director recommendation: Against
--------------------------------
FOR [X] AGAINST [X] ABSTAIN [X]
5. To approve the shareholder proposal to have one independent director with
five years of significant airline flight-operations management experience.
Director recommendation: Against
--------------------------------
FOR [X] AGAINST [X] ABSTAIN [X]
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournments
thereof.
Change of Address and/or Comments Mark Here [X]
Please sign as the name appears hereon. When shares are held by joint tenants,
both should sign. When signing as an attorney, executor, administrator, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If partnership,
please sign in partnership name by authorized person.
Date: , 2000
Signature
Signature if held jointly
Votes must be indicated
(x) in Black or Blue ink. [X]
Please Mark, Sign, Date and Return the
Proxy Card Promptly Using the Enclosed
Envelope.
<PAGE>
AIRBORNE FREIGHT CORPORATION
3101 Western Avenue, P.O. Box 662, Seattle WA 98111
P R O X Y
This Proxy is Soliciated on Behalf of the Board of Directors
The undersigned hereby appoints Harold M. Messmer, Jr., Mary Agnes
Wilderotter and Robert S. Cline as Proxies, each with the power to appoint a
substitute, and hereby authorizes them to represent and to vote, in such manner
as in their discretion shall be deemed appropriate to carry out the authority as
designated below, all the shares of Common Stock of Airborne Freight Corporation
(the "Company") held of record by the undersigned on Febrary 21, 2000, at the
annual meeting of shareholders to be held April 25, 2000, or any adjournments
thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. Except as otherwise directed, this proxy
will be voted FOR the election of the nominees named on the reverse side, FOR
approval of the material terms of the 2000-2004 Executive Incentive Compensation
Plan; FOR approval if the Airborne Freight Corporation 2000 Director Stock
Option Plan; AGAINST the shareholder proposal to declassify the Board for the
purpose of director election; and AGAINST the shareholder proposal to have one
independent director with five years of significant airline flight-operations
management experience.
AIRBORNE FREIGHT CORPORATION
P.O. BOX 11249
NEW YORK, N.Y. 10203-0249
Continued, and to be signed and dated, on reverse side.
