<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 34-0-17570
AMERICAN FREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 74-2391754
State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
2200 Forward Drive, Harrison, Arkansas 72601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (870) 741-9000
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at September 30, 1998:
31,638,553.
<PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
SEPTEMBER 30, December 31,
1998 1997
---------------------------
(UNAUDITED) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,854 $ 1,755
Trade receivables, less allowance
for doubtful accounts
(1998-$1,794; 1997-$1,774) 93,959 78,700
Operating supplies and inventories 3,969 2,882
Prepaid expenses 12,686 8,671
Deferred income taxes 17,626 13,306
Income taxes receivable - 1
---------- ----------
Total current assets 130,094 105,315
Property and equipment 758,314 699,176
Accumulated depreciation
and amortization (270,389) (230,870)
---------- ----------
487,925 468,306
Other assets 2,157 1,952
---------- ----------
$ 620,176 $ 575,573
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 16,387 $ 12,910
Accrued expenses 73,724 54,114
Federal and state income taxes 3,082 -
Current portion of long-term debt 11,676 11,497
---------- ----------
Total current liabilities 104,869 78,521
Long-term debt, less current
portion (Note B) 202,173 210,411
Deferred income taxes 65,993 59,225
Shareholders' equity
Common stock, par value $.01 per share--
authorized 250,000 shares; issued and
outstanding 31,639 in 1998 and
31,568 in 1997 316 316
Additional paid-in capital 105,536 104,832
Retained earnings 141,289 122,268
---------- ----------
247,141 227,416
---------- ----------
$ 620,176 $ 575,573
========== ==========
</TABLE>
Note: The condensed consolidated balance sheet at December 31, 1997,
has been derived from the audited consolidated financial statements
at that date.
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(000's omitted, except per share data)
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
------------------ ------------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $254,047 $233,760 $731,098 $645,899
OPERATING EXPENSES AND COSTS
Salaries, wages and benefits 153,923 140,582 446,900 389,159
Operating supplies and expenses 20,325 17,845 60,506 55,021
Operating taxes and licenses 10,809 8,828 31,250 26,306
Insurance 7,902 6,462 22,419 19,876
Communications and utilities 4,446 3,673 13,157 10,748
Depreciation and amortization 14,047 13,237 41,627 39,107
Rents and purchased transportation 14,964 16,275 42,399 39,772
Other 10,419 9,873 30,436 26,951
------------------ ------------------
236,835 216,775 688,694 606,940
------------------ ------------------
OPERATING INCOME 17,212 16,985 42,404 38,959
OTHER INCOME (EXPENSE)
Interest expense (3,848) (4,005) (11,861) (12,265)
Interest income 135 79 263 201
Gain (loss) on disposal
of assets 238 (105) 1,079 (72)
Other, net 30 31 83 50
------------------ ------------------
(3,445) (4,000) (10,436) (12,086)
INCOME BEFORE INCOME TAXES 13,767 12,985 31,968 26,873
------------------ ------------------
FEDERAL AND STATE INCOME TAXES
Current 5,117 3,170 10,500 6,550
Deferred 459 1,920 2,447 3,984
------------------ ------------------
5,576 5,090 12,947 10,534
------------------ ------------------
NET INCOME $ 8,191 $ 7,895 $ 19,021 $ 16,339
================== ==================
PER SHARE (NOTE D)
Net income-basic $ 0.26 $ 0.25 $ 0.60 $ 0.52
Net income-assuming dilution $ 0.26 $ 0.25 $ 0.60 $ 0.52
================== ==================
AVERAGE SHARES OUTSTANDING (NOTE D)
Basic 31,639 31,414 31,606 31,324
Assuming dilution 31,670 31,811 31,682 31,633
================== ==================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
<TABLE>
Nine Months Ended
September 30
1998 1997
----------------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 67,792 $ 61,788
INVESTING ACTIVITIES
Proceeds from sales of assets 2,818 2,452
Capital expenditures (63,144) (48,188)
---------- ----------
Net cash used by investing activities (60,326) (45,736)
FINANCING ACTIVITIES
Principal payments on long-term debt (25,716) (62,712)
Proceeds from notes payable and
long-term borrowings 17,657 48,400
Proceeds from issuance of common stock 692 1,724
---------- ----------
Net cash used by financing activities (7,367) (12,588)
---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 99 $ 3,464
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results of the nine month period ended September 30, 1998, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to
the Company's consolidated financial statements and footnotes
thereto included in Form 10-K for the year ended December 31, 1997.
NOTE B - LONG-TERM DEBT
As of September 30, 1998, the Company has outstanding borrowings of
$59,000,000 under its existing $160,000,000 unsecured revolving
line of credit. The proceeds of these borrowings were used for the
purchase of revenue equipment and for the purchase and construction
of Customer Center facilities. At September 30, 1998, the amount
available for borrowing under the line of credit was $101,000,000.
In addition to this credit facility, the Company has obtained
letters of credit totaling $3,976,000 to provide collateral on its
self-insurance plan.
As of September 30, 1998, the Company has outstanding borrowings of
$127,250,000 under an uncommitted Master Shelf Agreement which
provides for the issuance of up to $140,000,000 of senior
promissory notes with an average life not to exceed twelve years.
In addition, the Company has outstanding an unsecured senior note
for $20,000,000 payable in equal annual installments of $5,000,000
through November 2001.
NOTE C - COMMITMENTS
Commitments for the purchase of revenue equipment and the purchase
or construction of Customer Centers aggregated approximately
$21,123,000 at September 30, 1998.
NOTE D - EARNINGS PER SHARE
Net income for purposes of basic earnings per share and earnings
per share--assuming dilution was $8,191,000 and $7,895,000 for the
three month periods ended September 30, 1998 and 1997,
respectively. For the nine month periods ended September 30, 1998
and 1997, net income for purposes of basic earnings per share and
earnings per share--assuming dilution was $19,021,000 and
$16,339,000, respectively. A reconciliation of average shares
outstanding for these periods is presented below:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Average shares outstanding-basic 31,639 31,414 31,606 31,324
Effect of dilutive stock options 31 397 76 309
-------- -------- -------- --------
Average shares outstanding-
assuming dilution 31,670 31,811 31,682 31,633
======== ======== ======== ========
</TABLE>
<PAGE>
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
The impact of adoption of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" which is
effective for fiscal years beginning after December 15, 1997 was
not material.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities."
The Statement is effective for all quarters of fiscal years
beginning after June 15, 1999 and establishes accounting and
reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability at
its fair value. The Company does not anticipate that the adoption
of SFAS 133 will have a material effect on earnings or the
financial position of the Company.
NOTE F - RECENT EVENTS
On October 20, 1998, the Company announced that its Board of
Directors has authorized the repurchase of up to $20 million of the
Company's common stock. The repurchases will be made through open
market trades from time to time based upon market conditions.
On August 26, 1998, the Company announced that its Board of
Directors adopted a Shareholders' Rights Plan in which rights to
purchase shares of American Freightways Common Stock will be
distributed as a dividend, one Right per share, to record owners of
American Freightways Common Stock as of the close of business on
August 31, 1998. The Plan is designed to require that any
potential acquiror seeking to obtain control of American
Freightways treats all American Freightways shareholders fairly and
equally and to deter the use of coercive takeover tactics.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth, for the periods indicated, the
percentages of operating expenses and other items to operating
revenue:
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and benefits 60.6% 60.1% 61.1% 60.3%
Operating supplies and expenses 8.0% 7.6% 8.3% 8.5%
Operating taxes and licenses 4.3% 3.8% 4.3% 4.1%
Insurance 3.1% 2.8% 3.1% 3.1%
Communications and utilities 1.7% 1.6% 1.8% 1.6%
Depreciation and amortization 5.5% 5.6% 5.7% 6.0%
Rents and purchased
transportation 5.9% 7.0% 5.8% 6.2%
Other 4.1% 4.2% 4.1% 4.2%
---- ---- ---- ----
Total operating expenses
and costs 93.2% 92.7% 94.2% 94.0%
---- ---- ---- ----
Operating income 6.8% 7.3% 5.8% 6.0%
Interest expense (1.5%) (1.7%) (1.6%) (1.9%)
Other income, net 0.1% 0.0% 0.2% 0.0%
---- ---- ---- ----
Income before income taxes 5.4% 5.6% 4.4% 4.1%
Income taxes 2.2% 2.2% 1.8% 1.6%
---- ---- ---- ----
Net income 3.2% 3.4% 2.6% 2.5%
==== ==== ==== ====
</TABLE>
RESULTS OF OPERATIONS
Operating Revenue
- -----------------
Operating revenue for the nine months ended September 30, 1998 was
$731,098,000, up 13.2%, compared to $645,899,000 for the nine
months ended September 30, 1997. Operating revenue for the three
months ended September 30, 1998 was $254,047,000, up 8.7%, compared
to $233,760,000 for the three months ended September 30, 1997. The
growth in operating revenue was primarily the result of increased
revenue per hundred weight and increased tonnage from new and
existing customers.
<PAGE>
Tonnage handled by the Company during the nine and three months
ended September 30, 1998, increased 10.4% and 6.2%, respectively,
over the same time periods of 1997. This increase in tonnage was
mainly a result of the following:
- - The Company continued to increase its market penetration into
existing service territories, particularly those geographic areas
added during 1995, 1996 and 1997. During 1995, the Company
expanded its all-points coverage to the states of Colorado,
Florida, Iowa, Nebraska, North Carolina, South Carolina and
Wisconsin. 1996 expansions included the states of Delaware,
Maryland, Minnesota, Virginia and West Virginia. Effective August
4, 1997, all-points coverage was added to the state of New Mexico.
- - The continued increase in intrastate tonnage following the
deregulation of intrastate commerce effective January 1, 1995.
- - Effective January 1, 1998, the Company increased its all-
points coverage to 28 states with the addition of the state of
Michigan.
Revenue per hundred weight for the first nine months of 1998 was up
2.5% from levels experienced in the first nine months of 1997.
Factors most impacting revenue per hundred weight were:
- - A general rate increase of approximately 5.5% effective
January 1, 1998. General rate increases initially affect
approximately 45% of the Company's revenues. The remaining
revenues are derived from contracts and guarantees and are
negotiated throughout the year.
- - A fuel surcharge, included in revenue, was in effect during
the first nine months of 1997, but not in effect for the majority
of 1998. The Company initiated a fuel surcharge beginning
September 6, 1996 to help recover the increased costs of fuel.
This surcharge is tied to the Department of Energy's National
Diesel Fuel Index and was 0.7% for LTL shipments as of September
30, 1997. The surcharge is designed to suspend at the time this
national index moves below $1.15 per gallon. Effective January 7,
1998, the fuel surcharge was suspended and remains suspended as of
September 30, 1998.
Even though inventory adjustments in the softening consumer goods
sector of the economy appeared to have reduced demand for less-than-
truckload services, management expects that growth in operating
revenue is sustainable in the near term. Although the Company is
constantly evaluating future expansions, a major focus for growth
in operating revenue in the near term will be further penetration
of existing markets. As a result, any near-term percentage growth
in operating revenue will likely be less than that experienced in
recent years.
Operating Expenses
- ------------------
Operating expenses as a percentage of operating revenue increased
slightly to 94.2% for the nine months ended September 30, 1998 from
94.0% in the nine months ended September 30, 1997. Operating
expenses as a percentage of operating revenue increased to 93.2% in
the three months ended September 30, 1998 from 92.7% in the three
months ended September 30, 1997. The following categories of
expenses declined as a percentage of revenue for the first nine
months of 1998 as compared to the same time period during 1997:
- - Depreciation and amortization as a percentage of operating
revenue improved to 5.7% in the nine months ended September 30,
1998 from 6.0% in the nine months ended September 30, 1997. This
improvement was largely due to the increased usage of operating
lease financing of revenue equipment.
- - Rents and purchased transportation as a percentage of
operating revenue declined to 5.8% in the nine months ended
September 30, 1998 from 6.2% in the nine months ended September 30,
1997. The improvement was a result of three principal reasons: 1)
Short-term transportation equipment rental declined as compared
with the third quarter of 1997. The August 1997 strike by the
International Brotherhood of Teamsters against United Parcel
Service created an increase in freight volumes resulting in a
temporary need for additional revenue equipment. 2) During the
third quarter of 1998 the Company decreased its utilization of
owner operators in its pick up and delivery operations, and
3) the Company's usage of purchased transportation in selected line-
haul lanes has declined in relation to overall mileage. These
improvements were partially offset by increased usage of operating
lease financing. Management expects rents and purchased
transportation as a percentage of operating revenue to remain at
current levels.
<PAGE>
The improvements in operating expenses as a percentage of operating
revenue were offset by increases in the following area:
- - Salaries, wages and benefits as a percentage of revenue
increased to 61.1% in the nine months ended September 30, 1998 from
60.3% in the nine months ended September 30, 1997. This increase
was largely the result of increased costs in the areas of workmen's
compensation and health care. After benefiting from relatively low
claims in these areas during the first nine months of 1997, the
level of claims in 1998 returned to a level more typically
experienced by the Company. Management expects that during the
remainder of 1998, these expenses will remain at current levels.
Comparing the first nine months of 1998 to the same period of 1997,
salaries and wages as a percentage of operating revenue remained
relatively flat despite general wage increases of 3.5% in March
1998 and 1.6% in September 1998. During the remainder of 1998,
management anticipates that ongoing educational programs and
changes in operations will result in productivity gains in the form
of improved pickup and delivery density, increased line haul load
factor and more direct line haul schedules. However, these gains
cannot be assured and are subject to a variety of factors, which
may or may not be within the control of management.
Other
- -----
Interest expense as a percentage of operating revenue decreased to
1.6% in the nine months ended September 30, 1998, compared to 1.9%
in the nine months ended September 30, 1997. This improvement is
primarily the result of lower interest rates and of reducing total
debt to $213,849,000 as of September 30, 1998 from $223,926,000 as
of September 30, 1997.
The year to date results for 1998 were favorably impacted by a gain
of $822,000 before taxes as a result of the sale of a surplus
property.
The effective tax rate of the Company was 40.5% for the nine months
ended September 30, 1998, up from 39.2% for the same time period of
1997. This increase was due to increased federal tax rates on
higher levels of income, as well as higher state tax rates.
Net income for the nine months ended September 30, 1998, was
$19,021,000, up 16.4%, from $16,339,000 for the nine months ended
September 30, 1997. Net income for the three months ended
September 30, 1998, was $8,191,000, up 3.7%, from $7,895,000 for
the three months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Capital requirements during the nine months ended September 30,
1998 consisted primarily of $60,326,000 in investing activities.
The Company invested $63,144,000 in capital expenditures during the
nine months ended September 30, 1998 comprised of $14,602,000 in
additional revenue equipment, $28,939,000 in new Customer Center
facilities or the expansion of existing facilities and $19,603,000
in other equipment. Management expects capital expenditures for
the full year of 1998 will be approximately $90,000,000. However,
the amount of capital expenditures required in 1998 will be
dependent on the progress of several major Customer Center
construction projects. At September 30, 1998, the Company had
commitments for land, Customer Centers, revenue and other equipment
of approximately $21,123,000. These commitments were mostly for
the completion of projects in process at September 30, 1998.
The Company provided for its capital resource requirements in the
nine months ended September 30, 1998 predominantly with cash from
operations. Cash from operations totaled $67,792,000 in the nine
months ended September 30, 1998 compared to $61,788,000 provided by
operations in the nine months ended September 30, 1997. Net
financing activities required an additional $7,367,000 of cash flow
in the nine months ended September 30, 1998. Two primary sources
of credit financing were available to the Company: the revolving
line of credit and the Master Shelf facility.
- - The Company experiences periodic cash flow fluctuations common
to the industry. Cash outflows are heaviest during the first part
of any given year while cash inflows are normally weighted towards
the last two quarters of the year. To smooth these fluctuations
and to provide flexibility to fund future growth, the Company
utilizes a variable-rate, unsecured revolving line of credit of
$160,000,000 provided by NationsBank of Texas, N.A. (agent), Chase
Bank of Texas, N.A., Wachovia Bank of Georgia, N.A., ABN-AMRO Bank
N.V. and The First National Bank of Chicago. At September 30,
1998, $59,000,000 was outstanding on the revolving line of credit,
leaving $101,000,000 available for borrowing. The Company also had
$15,000,000 available under its short-term, unsecured revolving
$15,000,000 line of credit with NationsBank of Texas, N.A. This
line of credit is also used to obtain letters of credit required
for its self-insurance program. At September 30, 1998, the Company
had obtained letters of credit totaling $3,976,000 for this
purpose.
<PAGE>
- - To assist in financing longer-lived assets, the Company has an
uncommitted Master Shelf Agreement with the Prudential Insurance
Company of America which provides for the issuance of up to
$140,000,000 in medium to long-term unsecured notes at an
interest rate calculated at issuance. At September 30, 1998,
the Company had $127,250,000 outstanding under this facility.
Management expects that the Company's existing working capital and
its available lines of credit are sufficient to meet the Company's
commitments as of September 30, 1998, and to fund current operating
and capital needs. However, if additional financing is required,
management believes it will be available.
The Company uses off-balance sheet financing in the form of
operating leases primarily in the following areas; land and
structures, revenue equipment and other equipment. At September
30, 1998, future rental commitments on operating leases were
$108,207,000. The Company prefers to utilize operating leases for
these areas and plans to use them in the future when such financing
is available and suitable.
Future rental commitments on operating leases are as follows:
<TABLE>
Land and Revenue Other
Total Structures Equipment Equipment
------------------------------------------
<C> <C> <C> <C> <C>
1998 $ 10,329 $ 1,525 $ 3,030 $ 5,774
1999 29,073 4,739 12,119 12,215
2000 25,683 2,836 12,119 10,728
2001 16,883 1,880 11,343 3,660
2002 12,845 1,054 11,589 202
Thereafter 13,394 1,433 11,961 ---
------------------------------------------
Total $108,207 $ 13,467 $ 62,161 $ 32,579
------------------------------------------
</TABLE>
YEAR 2000 ISSUES
The Company recognizes the Year 2000 problem and has developed a
Board of Director sponsored Project Plan that identifies all date
related issues relating to the Company's Information Technology
(IT) applications, end user supported applications, IT
infrastructure, embedded devices and business partners. The
Project Plan provides that all application modifications and
infrastructure upgrades will be complete by December 31, 1998.
Final testing and production implementation are expected to be
completed by June 30, 1999. Additionally, our mission critical
systems, written in house, are already Year 2000 compliant. The
Company intends to have all purchased software Year 2000 compliant
upgrades installed by the December 31, 1998 timeframe.
Expenditures related to the Company's Year 2000 initiatives have
not been and are not expected to be material to the Company's
results of operations or financial position.
The Company has initiated discussions with its significant
customers and suppliers to determine the extent to which the
Company's interface systems would be vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The
Company has not received written assurances from its significant
customers and suppliers that their systems will be timely converted
and would not have an adverse effect on the Company's systems. It
is not possible at this time to quantify the amount of business
that might be lost or the costs that could be incurred by the
Company as a result of the Company's significant customers' and
suppliers' failure to remediate their Year 2000 issues.
In addition, parts of the global infrastructure, including national
banking systems, electrical power, communications and governmental
activities, may not be fully functional after 1999. Infrastructure
failures could significantly reduce the Company's ability at
affected locations to serve its customers as effectively as they
are now being served. The Company has identified elements of the
infrastructure that are critical to its operations and is obtaining
information as to their expected Year 2000 readiness.
<PAGE>
To date, the Company has not established a contingency plan for
possible Year 2000 issues. The Company will establish, where
needed, contingency plans based on our actual testing experience.
While the Company believes its efforts to address the Year 2000
Issue will be successful in avoiding any material adverse effect on
the Company's operations or financial condition, it recognizes that
failure to resolve Year 2000 Issues on a timely basis could
significantly limit its ability to process its daily business
transactions for a period of time, especially if such failure is
coupled with third party or infrastructure failures. Similarly,
the Company could be significantly affected by the failure of one
or more significant business partners or components of the
infrastructure to conduct their respective operations after 1999.
Adverse effects could include, but are not limited to, loss of
communication links with Customer Centers, loss of electric power,
inability to process transactions, or engage in similar normal
business activities.
The foregoing statements regarding the Company's state of
readiness, costs of conversion, risks and contingency plans for
Year 2000 are based on management's current estimates and
evaluations using available information. There can be no
assurances that management's estimates and evaluations will prove
to be accurate, and actual results could differ materially from
those currently anticipated. Factors which might cause material
changes include, but are not limited to, the availability of Year
2000 personnel, the readiness of third parties and the Company's
ability to respond to unforeseen Year 2000 complications.
ENVIRONMENTAL
At September 30, 1998, the Company had no outstanding inquiries
with any state or federal environmental agency.
RECENT EVENTS
On October 20, 1998, the Company announced that its Board of
Directors has authorized the repurchase of up to $20 million of the
Company's common stock. The repurchases will be made through open
market trades from time to time based upon market conditions.
On September 10, 1998, the Company announced that effective
November 1, 1998, the Company will institute a general rate
increase ranging from 5.5% to 5.9%, as well as increase minimum
charge floors by $2.00. The increase applies to the Company's
interstate and intrastate common carrier freight rates published in
its 5000 series tariff. The Company derives somewhat less than 50%
of its revenue from the 5000 tariff.
On August 26, 1998, the Company announced that its Board of
Directors adopted a Shareholders' Rights Plan in which Rights to
purchase shares of American Freightways Common Stock will be
distributed as a dividend, one Right per share, to record owners of
American Freightways Common Stock as of the close of business on
August 31, 1998. The Plan is designed to require that any
potential acquiror seeking to obtain control of American
Freightways treats all American Freightways shareholders fairly and
equally and to deter the use of coercive takeover tactics.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis Section of this report
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements rely on a number of assumptions concerning
future events, and are subject to a number of uncertainties and
other factors, many of which are outside of AF's control, that
could cause actual results to differ materially from such
statements. These include, but are not limited to: general
economic conditions and demand for goods, particularly such
competition on pricing, revenues, and margins; the acceptance of
service offerings that offer higher margins than traditional
service offerings and costs of fuel and equipment.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
<PAGE>
INDEX
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets--September 30, 1998 and
December 31, 1997
Condensed consolidated statements of income-Three months ended
September 30, 1998 and 1997; Nine months ended September 30,
1998 and 1997
Condensed consolidated statements of cash flows--Nine months
ended September 30, 1998 and 1997
Notes to condensed consolidated financial statements--
September 30, 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
- ---------------------------
Item 5. Other Information
Effective June 29, 1998, the Securities and Exchange
Commission amended Rule 14a-4(c) under the Securities and Exchange
Act of 1934 (the "1934 Act") which governs the Company's use of
discretionary proxy voting authority with respect to stockholder
proposals that are not being included in the Company's proxy
solicitation materials pursuant to Rule 14a-8 of the 1934 Act. New
Rule 14a-4(c)(1) provides that if a stockholder wishing to make a
proposal fails to notify the Company at least 45 days prior to the
month and day of mailing their prior year's proxy statement (or by
an earlier or later date established by an overriding advance
notice provision contained in the Company's charter or bylaws),
then the management proxies named in the form of proxy distributed
in connection with the Company's proxy statement would be allowed
to use their discretionary voting authority to address the matter
submitted by the proponent, without discussion of the matter in the
proxy statement. In addition, if a stockholder desires to include
a proposal in the Company's proxy statement for the 1999 Annual
Meeting, the proposal must be received by the Company on or before
January 23, 1999, and must comply with the requirements of Rule 14a-
8 of the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(10) Shareholder Rights Agreement and exhibits dated
August 26, 1998
(27) Financial Data Schedule
(b) Reports on Form 8-K
Current report on 8-K dated August 31, 1998 (Adoption of
Shareholder Rights Plan)
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN FREIGHTWAYS CORPORATION
--------------------------------
(Registrant)
Date:November 4, 1998 /s/Frank Conner
----------------- --------------------------------
Frank Conner
Executive Vice President-Accounting &
Finance and Chief Financial Officer
<PAGE>
EXECUTION
COPY
AMERICAN FREIGHTWAYS CORPORATION
and
WACHOVIA BANK, N.A.
as Rights Agent
RIGHTS AGREEMENT
August 26, 1998
<PAGE>
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agents 4
Section 3. Issue of Rights Certificates 4
Section 4. Form of Rights Certificate 6
Section 5. Countersignature and Registration 6
Section 6. Transfer, Split Up, Combination, and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost, or
Stolen Rights Certificates 7
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights 8
Section 8. Cancellation and Destruction of Rights
Certificates 9
Section 9. Reservation and Availability of Capital Stock 10
Section 10. Common Stock Record 11
Section 11. Adjustment of Purchase Price, Number and Kind
of Shares, or Number of Rights 11
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares 18
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power 18
Section 14. Fractional Rights and Fractional Shares 20
Section 15. Rights of Action 21
Section 16. Agreement of Rights Holders 21
Section 17. Rights Certificate Holder Not Deemed a
Stockholder 22
Section 18. Concerning the Rights Agent 22
Section 19. Merger or Consolidation or Change of Name of
Rights Agent 23
Section 20. Duties of Rights Agent 23
Section 21. Change of Rights Agent 25
Section 22. Issuance of New Rights Certificate 26
Section 23. Redemption and Termination 26
Section 24. Exchange 27
Section 25. Notice of Certain Events 28
Section 26. Notices 28
Section 27. Supplement and Amendment 29
Section 28. Successors 30
<PAGE>
Section 29. Determinations and Actions by the Board of
Directors, etc. 30
Section 30. Benefits of this Agreement 30
Section 31. Severability 30
Section 32. Governing Law 31
Section 33. Counterparts 31
Section 34. Interpretation 31
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of August 26, 1998 (the
"Agreement"), between American Freightways Corporation, an
Arkansas corporation (the "Company"), and Wachovia Bank, N.A.
(the "Rights Agent").
BACKGROUND
On August 17, 1998 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a
dividend distribution of one Right for each share of common
stock, par value $.01 per share, of the Company (the "Common
Stock") outstanding at the Close of Business on August 31, 1998
(the "Record Date"), and has authorized the issuance of one Right
(as such number may be adjusted pursuant to the provisions of
Section 11(p)) for each share of Common Stock of the Company
issued between the Record Date (whether originally issued or
delivered from the Company's treasury) and the Distribution Date,
each Right initially representing the right to purchase one share
of Common Stock of the Company upon the terms and subject to the
conditions set forth below (the "Rights");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth in this Agreement, the parties hereby
agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Acquiring Person" means any Person that, together with
all Affiliates and Associates of such Person, is the Beneficial
Owner of 15% or more of the shares of Common Stock then
outstanding, but does not include (i) the Company; (ii) any
Subsidiary of the Company; (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company; (iv) any Person
organized, appointed or established by the Company for or
pursuant to the terms of any such plan; (v) any person that
becomes an Acquiring Person pursuant to a Permitted Transaction;
(vi) any Person that has become an Acquiring Person inadvertently
and, within five Business Days of being requested by the Company
to advise it regarding the same, certifies to the Company that
such Person acquired beneficial ownership of shares of Common
Stock in excess of 14.9% inadvertently or without knowledge of
the terms of the Rights and such certification is accepted as
true by a Requisite Majority acting in good faith, and such
Person divests as promptly as practicable a sufficient amount of
Common Stock so that such Person would no longer hold in excess
of 14.9% of the Common Stock then outstanding; (vii) any Person
that becomes an Acquiring Person solely as a result of a
reduction in the number of outstanding shares of Common Stock in
a transaction that is approved by a Requisite Majority, provided
that such Person will immediately be an Acquiring Person in the
event such Person thereafter acquires any additional shares of
Common Stock (other than as a result of a stock split or stock
dividend) while the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding; and (viii) any Person who is
the Beneficial Owner of 15% or more of the
<PAGE>
shares of Common Stock outstanding on the Rights Dividend
Declaration Date and any transferee of any of the shares of
Common Stock Beneficially Owned by such Person.
(c) "Affiliate" and "Associate" have the respective
meanings ascribed to such terms in Rule l2b-2 of the General
Rules and Regulations under the Exchange Act and in effect on the
date of this Agreement.
(d) A Person will be deemed the "Beneficial Owner" of, and
will be deemed to "beneficially own," any securities that:
(i) such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time or upon the occurrence of certain events)
pursuant to any agreement, arrangement, or understanding (whether
or not in writing) or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person will not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange,
(B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Distribution Date or (C) securities
issuable upon exercise of Rights, which were acquired by such
Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22
(the "Original Rights") or pursuant to Section 11(1) in
connection with an adjustment made with respect to any Original
Rights;
(ii) such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule l3d-3 of the General Rules and Regulations under
the Exchange Act), including pursuant to any agreement,
arrangement, or understanding, whether or not in writing;
provided, however, that a Person will not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
under this Section 1(d)(ii) as a result of an agreement,
arrangement, or understanding to vote such security if such
agreement, arrangement, or understanding: (1) arises solely from
a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (2) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(iii) are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate of
such Person) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement, or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy
as described in the proviso in Section l(d)(ii)), or disposing of
any voting securities of the Company;
provided, however, that nothing in this Section 1(d) will cause a
Person engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good
faith in a bona fide firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
<PAGE>
(e) "Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of
Arkansas are authorized or obligated by law or executive order to
close.
(f) "Close of Business" on any given date will mean
5:00 p.m., Harrison, Arkansas time, on such date; provided,
however, that if such date is not a Business Day it will mean
5:00 p.m., Harrison, Arkansas time, on the next succeeding
Business Day.
(g) "Common Stock" means the common stock, par value $.01
per share, of the Company, except that "Common Stock" when used
with reference to any Person other than the Company will mean the
capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest having power to
control or direct the management, of such Person.
(h) "Continuing Director" means any member of the Board of
Directors of the Company who (i) is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person and (ii) was either
a member of the Board of Directors of the Company on the date of
this Agreement or who subsequently became a director of the
Company and whose initial election or initial nomination for
election was approved by a majority of the Continuing Directors
then on the Board of Directors of the Company.
(i) "Distribution Date" means the Close of Business on the
tenth Business Day (unless extended by vote of a Requisite
Majority) after the earlier to occur of (i) the Stock Acquisition
Date or (ii) the date any Person commences or publicly announces
an intention to commence a tender offer or exchange offer for the
Common Stock which would result in, upon the consummation of such
offer, the Person making such offer, together with all of its
Affiliates and Associates, being the Beneficial Owner of 15% or
more of the Common Stock then outstanding (including any such
date that is after the date of this Agreement and prior to the
issuance of the Rights); provided, however, that if the tender
offer or exchange offer that gave rise to the Distribution Date
is cancelled, terminated or otherwise withdrawn within ten
Business Days of its announcement, such offer shall be deemed
never to have been made and no Distribution Date shall occur with
respect thereto.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(k) "NASDAQ" means the National Association of Securities
Dealers Automated Quotation System.
(l) "Permitted Transaction" means a stock acquisition or a
tender or exchange offer pursuant to a definitive agreement by
which a Person (who is not at the time an Acquiring Person) would
become an Acquiring Person and which has been approved by a
Requisite Majority prior to the execution of the definitive
agreement providing for the acquisition or the public
announcement of the offer, as the case may be.
(m) "Person" means any individual, firm, corporation,
partnership, limited liability company or other public or private
entity.
<PAGE>
(n) "Redemption Price" with respect to each Right means
$.01, as such amount may from time to time be adjusted in
accordance with Section 11. All references herein to the
Redemption Price means the Redemption Price as in effect at the
time in question.
(o) "Requisite Majority" means, at any time, the
affirmative vote of a majority of the Continuing Directors then
in office.
(p) "Rights Dividend Declaration Date" is August 17, 1998,
the date the Board of Directors of the Company declared a
dividend distribution of one Right for each share of Common Stock
outstanding on the Record Date.
(q) "Rights Shares" means the shares of Common Stock
issuable or issued upon the exercise of the Rights.
(r) "Section 11(a)(ii) Event" means any event described in
Section 11(a)(ii).
(s) "Section 13 Event" means any event described in clauses
(i), (ii), or (iii) of Section 13(a).
(t) "Stock Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, will
include, without limitation, a report filed pursuant to Section
13(d) under the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become an Acquiring Person.
(u) "Subsidiary" means, with reference to any Person, any
entity of which an amount of voting securities sufficient to
elect at least a majority of the directors or similar Persons of
such entity is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(v) "Trading Day" means a day on which the principal
national securities exchange or quotation system on which the
shares of Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national securities
exchange, a Business Day.
(w) "Triggering Event" means any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agents. The Company
hereby appoints the Rights Agent to act as agent for the Company
(which, in accordance with Section 3, prior to the Distribution
Date are also the holders of the Common Stock) in accordance with
the terms and conditions of this Agreement, and the Rights Agent
hereby accepts such appointment. The Company may from time to
time appoint such Co-Rights Agents pursuant to this Section or
successor Rights Agents pursuant to Section 21 as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Prior to the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of this Section 3(b)) by the
certificates for the Common Stock registered in the names
<PAGE>
of the holders of the Common Stock (which certificates for
Common Stock will be deemed also to be certificates for Rights)
and not by separate certificates, and (ii) the Rights will be
transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the
Company). As soon as practicable after the Distribution Date,
the Rights Agent will send by first-class, postage prepaid mail,
to each record holder of the Common Stock as of the Distribution
Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the
form of Exhibit A (the "Rights Certificates"), evidencing one
Right for each share of Common Stock so held, subject to
adjustment as provided in this Agreement. In the event that an
adjustment in the number of Rights per share of Common Stock has
been made pursuant to Section 11(p), at the time of distribution
of the Rights Certificates, the Company will make the necessary
and appropriate rounding adjustments (in accordance with Section
14(a)) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates.
(b) As soon as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially
the form of Exhibit B, by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for
the Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such
certificates for the Common Stock and the registered holders of
the Common Stock will also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or
the Expiration Date (as defined in Section 7), the transfer of
any certificates representing shares of Common Stock in respect
of which Rights have been issued will also constitute the
transfer of the Rights associated with such shares of Common
Stock.
(c) Rights will be issued in respect of all shares of
Common Stock that are issued (whether originally issued or from
the Company's treasury) after the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date.
Certificates representing such shares of Common Stock will also
be deemed to be certificates for Rights, and will bear the
following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER
TO CERTAIN RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT
BETWEEN AMERICAN FREIGHTWAYS CORPORATION (THE
"COMPANY") AND WACHOVIA BANK, N.A. (THE "RIGHTS AGENT")
DATED AS OF AUGUST 26, 1998 (AS AMENDED FROM TIME TO
TIME, THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
HEREBY INCORPORATED IN THIS CERTIFICATE BY REFERENCE
AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES
OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE
EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER
BE EVIDENCED BY THIS
<PAGE>
CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF
THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, AS IN
EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE PROMPTLY
AFTER RECEIPT OF A WRITTEN REQUEST. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY ANY PERSON WHO IS, WAS, OR
BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY
HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
With respect to the shares of Common Stock issued after the
Record Date, until the earlier of (i) the Distribution Date or
(ii) the Expiration Date, the Rights associated with the Common
Stock represented by such certificates will be evidenced by such
certificates alone and registered holders of Common Stock will
also be the registered holders of the associated Rights, and the
transfer of any of such certificates will also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificates.
Section 4. Form of Rights Certificate.
The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse of the
rights certificates) will each be substantially in the form set
forth in Exhibit A and may have such marks of identification or
designation and such legends, summaries, or endorsements as the
Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange or quotation system on which the Rights may from time to
time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22, the Rights Certificates,
whenever distributed, will be dated as of the Record Date and on
their face will entitle the holders of such Rights Certificates
to purchase such number of shares of Common Stock as is set forth
in such Rights Certificates at the price set forth in such Rights
Certificates (such exercise price per share, the "Purchase
Price"), but the amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price will be subject
to adjustment as provided in this Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates will be executed on behalf of
the Company by its Chairman of the Board, its Chief Executive
Officer, its Chief Financial Officer, its President or any Vice
President, either manually or by facsimile signature, will have
affixed thereto the Company's seal or a facsimile thereof, and
will be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The
Rights Certificates will be countersigned by the Rights Agent,
either manually or by facsimile signature and will not be valid
for any purpose unless so countersigned. In case any officer of
the Company who has
<PAGE>
signed any of the Rights Certificates ceases to be such
officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights
Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force
and effect as though the Person who signed such Rights
Certificates had not ceased to be such officer of the Company,
and any Rights Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such
Rights Certificate, is a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of
this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights
Certificates upon exercise or transfer, books for registration
and transfer of the Rights Certificates issued under this
Agreement. Such books will show the names and addresses of the
respective holders of the Rights Certificates, the number of
Rights evidenced on the face of the Rights Certificates, and the
date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination, and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost, or Stolen Rights
Certificates.
(a) Subject to the provisions of Section 7(e) and Section
14, at any time after the Distribution Date, and at or prior to
the Expiration Date, any Rights Certificate or Certificates may
be transferred, split up, combined, or exchanged for another
Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of Rights Shares (or,
following a Triggering Event, Common Stock, other securities,
cash, or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine, or
exchange any Rights Certificate or Rights Certificates will make
such request in writing delivered to the Rights Agent, and will
surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined, or exchanged at the principal
office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company will be
obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the
registered holder has completed and signed the certificate
contained in the form of assignment on the reverse side of such
Rights Certificate and has provided sufficient additional
evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the
Company requests in good faith. Thereupon, the Rights Agent
will, subject to Section 4, Section 7(e) and Section 14,
countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination, or exchange
of any Rights Certificate.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction, or mutilation of a Rights Certificate, and, in case
of loss, theft, or destruction, of indemnity or security
satisfactory to them, and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental
<PAGE>
thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company
will execute and deliver a new Rights Certificate of like tenor
to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed, or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Subject to Section 7(e), the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided in this Agreement including,
without limitation, the restrictions on exercisability set forth
in Section 9(c), Section 11(a)(iii), Section 23(a) and Section
24) in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side of
the Rights Certificate duly executed, to the Rights Agent at the
principal office or offices of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase
Price for each share of Common Stock (or other securities, cash
or other assets, as the case may be) as to which such surrendered
Rights are then exercisable, at or prior to the earlier of (i)
the Close of Business on August 31, 2003, (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 or (iii) the time at which such rights are
exchanged as provided in Section 24 (the earlier of such times
being the "Expiration Date")).
(b) The Purchase Price for each share of Common Stock
pursuant to the exercise of a Right will initially be $25,
subject to adjustment from time to time as provided in Section
11, and Section 13(a). The Purchase Price will be payable in
accordance with Section 7(c).
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment of the Purchase
Price for the shares of Common Stock (or other shares,
securities, cash or other assets, as the case may be) to be
purchased and an amount equal to any applicable transfer tax, the
Rights Agent will, subject to Section 20(k), promptly (i)(A)
requisition from any transfer agent of the shares of Common Stock
(or make available, if the Rights Agent is the transfer agent for
such shares) certificates for the total number of shares of
Common Stock to be purchased (the Company hereby irrevocably
authorizing its transfer agent to comply with all such requests)
or (B) if the Company has elected to deposit the shares of Common
Stock with a depository agent, requisition from the depository
agent depository receipts representing such number of shares of
Common Stock as are to be purchased (in which case certificates
for the shares of Common Stock represented by such receipts will
be deposited by the transfer agent with the depository agent) and
the Company will direct the depository agent to comply with such
request; (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with
Section 14; (iii) after receipt of such certificates or
depository receipts, cause such certificates or depository
receipts to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or
names as may be designated by such holder; and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii)) will be made in cash or by certified bank check or
<PAGE>
bank draft payable to the order of the Company. In the event
that the Company is obligated to issue other securities
(including Common Stock) of the Company, pay cash, or distribute
other property pursuant to Section 11(a), the Company will make
all arrangements necessary so that such other securities, cash,
or other property are available for distribution by the Rights
Agent, if and when appropriate. The Company reserves the right
to require prior to the occurrence of a Triggering Event that,
upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Common Stock would be issued.
(d) If the registered holder of any Rights Certificate
exercises less than all the Rights evidenced by such certificate,
a new Rights Certificate evidencing the unexercised Rights will
be issued by the Rights Agent and delivered to, or upon the order
of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder,
subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights Beneficially Owned by any Person
referred to in clauses (i) through (iii) below will become null
and void without any further action and no holder of such Rights
will have any rights whatsoever with respect to such Rights,
under any provision of this Agreement or otherwise: (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee from an Acquiring Person (or from any
Associate or Affiliate of an Acquiring Person) that becomes a
transferee after the Acquiring Person becomes such, or (iii) a
transferee from an Acquiring Person (or of any such Associate or
Affiliate) that becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement, or
understanding regarding the transferred Rights or (B) a transfer
that the Board of Directors of the Company has determined is part
of an agreement, plan, arrangement, or understanding that has as
a substantial purpose or effect of the avoidance of this Section
7(e). The Company will use reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) are complied
with, but will have no liability under this Agreement to any
holder of Rights Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring
Person, or any of its Affiliates, Associates, or transferees.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights nor the Company will be obligated to
undertake any action with respect to a registered holder upon the
occurrence of any purported exercise as set forth in this Section
7 unless such registered holder has (i) completed and signed the
certificate contained in the form of election to purchase set
forth on the reverse side of the Rights Certificate surrendered
for such exercise, and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial owner)
or Affiliates or Associates thereof as the Company requests in
good faith.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange
will, if surrendered to the Company or any of its agents, be
delivered to the Rights Agent for
<PAGE>
cancellation or in cancelled form, or, if surrendered to the
Rights Agent, will be cancelled by it, and no Rights Certificates
will be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company will
deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent will so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent will deliver all
cancelled Rights Certificates to the Company, or will, at the
written request of the Company, destroy such cancelled Rights
Certificates, and in such case will deliver a certificate of
destruction to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company will use its best efforts to reserve and
keep available out of its authorized shares of Common Stock
(and/or other securities) or its authorized and issued shares of
Common Stock (and/or other securities) held in its treasury, the
number of shares of Common Stock (and/or other securities) that
will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Common Stock (and, following
the occurrence of a Triggering Event, Common Stock or other
securities) issuable and deliverable upon the exercise of the
Rights may be listed on any national securities exchange or
automated quotation system, the Company will use its reasonable
efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed
on such exchange or automated quotation system upon official
notice of issuance upon such exercise.
(c) The Company will use its best efforts to (i) file, as soon
as practicable following the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii), a registration statement
under the Act, with respect to the securities purchasable upon
exercise of the Rights or issued in an exchange pursuant to
Section 24 on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities,
and (B) the Expiration Date. The Company will also take such
action as may be appropriate under, or to ensure compliance with,
the applicable state securities laws in connection with the
exercisability of the Rights. The Company may temporarily
suspend, for up to 90 days after the date described in clause (i)
of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company will
issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension no longer remains in
effect. In addition, if the Company determines that a
registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been
declared effective. Notwithstanding any provision of this
Agreement to the contrary, the Rights will not be exercisable in
any jurisdiction if the requisite
<PAGE>
qualification in such jurisdiction has not been obtained, the
exercise of such Rights is not permitted under applicable law, or
a registration statement has not been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of
Common Stock (and/or other securities) delivered upon exercise of
Rights will, at the time of delivery of the certificates for such
shares upon payment of the Purchase Price, be duly and validly
authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer
taxes and charges that may be payable in respect of the issuance
or delivery of the Rights Certificates and any Common Stock or
other certificates issued upon the exercise of Rights. The
Company will not, however, be required to pay any transfer tax
that may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or
delivery of Common Stock (or other securities, as the case may
be) in respect of a name other than that of the registered holder
of the Rights Certificates or to issue or deliver any Common
Stock or other certificates in a name other than that of the
registered holder until such tax has been paid (any such tax
being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Common Stock Record. Each Person in whose name
any Rights Share certificate is issued will, for all purposes, be
deemed to have become the record holder of such Rights Shares
represented thereby, and such Certificate will be dated, on the
date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if
the date of such surrender and payment is a date upon which the
Common Stock (or other securities, as the case may be) transfer
books of the Company are closed, such Person will be deemed to
have become the record holder of the Rights Shares on, and such
certificate will be dated, the next succeeding Business Day on
which the Common Stock (or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the Rights Certificate holders will
not be entitled to any stockholder rights with respect to Rights
Shares, including, without limitation, the right to vote, to
receive dividends or other distributions, or to exercise any
preemptive rights, and will not be entitled to receive any notice
of any proceedings of the Company, except as provided in this
Agreement.
Section 11. Adjustment of Purchase Price, Number and Kind
of Shares, or Number of Rights. The Purchase Price, the number
and kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company at any time after the date of
this Agreement (A) declares a dividend on the Common Stock
payable in shares of Common Stock, (B) subdivides the outstanding
Common Stock, (C) combines the outstanding Common Stock into a
smaller number of shares, or (D) issues any shares of its capital
stock in a reclassification of the Common Stock (including,
without limitation, any such reclassification in connection with
a consolidation
<PAGE>
or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a)
and Section 7(e), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and
kind of shares of Common Stock or capital stock, as the case may
be, issuable on such date, will be proportionately adjusted so
that the holder of any Right exercised after such time will be
entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Common Stock
or capital stock, as the case may be, that, if such Right had
been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. If an event occurs that would require an
adjustment under both this Section 1 l(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i)
will be in addition to, and will be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) In the event that any Person, alone or together
with its Affiliates and Associates, at any time after the Rights
Dividend Declaration Date, becomes an Acquiring Person, then,
proper provision will be made so that each Right holder (except
as provided in Section 7(e)) will thereafter have the right to
receive, upon exercise of such Right at the then current Purchase
Price in accordance with the terms of this Agreement, such number
of Rights Shares equal to the result obtained by (x) multiplying
the then current Purchase Price by the then number of Rights
Shares for which a Right is then exercisable and (y) dividing
that product by 50% of the Current Market Price (defined in
Section 11(d)) per share of Common Stock on the date such Person
became an Acquiring Person (such number of Rights Shares, the
"Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock that are authorized by the Company's articles of
incorporation but not issued, or issued but not outstanding, are
not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Company will, upon the
exercise of a Right and payment of the applicable Purchase Price,
(A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value"), and (B) with
respect to each Right (subject to Section 7(e)), make adequate
provision to substitute for the Adjustment Shares (1) cash, (2) a
reduction in the Purchase Price, (3) other equity securities of
the Company (including, without limitation, shares, or units of
shares, of preferred stock), that a Requisite Majority has deemed
to have essentially the same rights, privileges and preferences
as shares of Common Stock ("Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to
the Current Value, where such aggregate value has been
conclusively determined by a Requisite Majority based upon the
advice of a nationally recognized investment banking firm
selected by a Requisite Majority; provided, however, that if the
Company has not made adequate provision to deliver value pursuant
to clause (b) above within 30 days following the first occurrence
of a Section 11(a)(ii) Event, then the Company will be obligated
to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash,
which shares or cash have an aggregate value equal to the Spread.
The term "Spread"
<PAGE>
means the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board of Directors determines in good
faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in
full of the Rights, the 30-day period set forth above may be
extended to the extent necessary, but not more than 90 days after
the Section 11(a)(ii) Triggering Event, in order that the Company
may seek shareholder approval for the authorization of such
additional shares (such 30-day period, as it may be extended,
being the "Substitution Period"). To the extent that action is
to be taken pursuant to this Section 11(a)(iii), the Company (1)
will provide, subject to Section 7(e), that such action will
apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any required shareholder
approval or to decide the appropriate form of distribution to be
made and the value thereof. In the event of any such suspension,
the Company will issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension no
longer remains in effect. For purposes of this Section
11(a)(iii), the Current Value of each Adjustment Share will be
the Current Market Price per share of the Common Stock on the
effective date of the Section 11(a)(ii) Event and the per share
or per unit value of any Common Stock Equivalent will be deemed
to equal the Current Market Price per share of the Common Stock
on such date.
(b) In case the Company fixes a record date for the issuance of
rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase (for a period
expiring within 45 calendar days after such record date) Common
Stock (and/or Common Stock Equivalents) (or securities
convertible into Common Stock) at a price per share of Common
Stock (or having a conversion price per share, if a security
convertible into Common Stock) less than the Current Market Price
per share of Common Stock on such record date, the Purchase Price
to be in effect after such record date will be determined by
multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, (i) the numerator of which is
number of shares of Common Stock outstanding on such record date,
plus the number of shares of Common Stock that the aggregate
offering price of the total number of shares of Common Stock
(and/or Common Stock Equivalents) so to be offered (or the
aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such Current Market Price,
and (ii) the denominator of which is the number of shares of
Common Stock outstanding on such record date, plus the number of
additional shares of Common Stock (and/or Common Stock
Equivalents) to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible). In the event that the number of shares of Common
Stock issuable under the terms of a convertible security, or the
conversion or exercise price of such convertible security,
changes after the initial issuance of such convertible security,
an adjustment will be made to the Purchase Price that conforms
with the adjustment set forth in this Section 11(b). In case
such subscription price may be paid by delivery of consideration
part or all of which may be in a form other than cash, the value
of such consideration will be as conclusively determined in good
faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the
Rights Agent and will be binding on the Rights Agent and the
holders of the Rights. Shares of Common Stock owned by or held
for the account of the Company will be deemed not to be
outstanding for the purpose of any such computation. Such
adjustment will be made successively whenever such a record date
is fixed,
<PAGE>
and in the event that such rights or warrants are not so issued,
the Purchase Price will be adjusted to be the Purchase Price that
would then be in effect if such record date had not been fixed.
(c) In case the Company fixes a record date for a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Common Stock, but including any
dividend payable in stock other than Common Stock) or
subscription rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such
record date will be determined by multiplying the Purchase Price
in effect immediately prior to such record date by a fraction,
(i) the numerator of which is the Current Market Price per share
of Common Stock on such record date, less the fair market value
(as conclusively determined in good faith by the Board of
Directors of the Company, whose determination will be described
in a statement filed with the Rights Agent) of the portion of the
cash, assets, or evidences of indebtedness so to be distributed
or of such subscription rights or warrants applicable to a share
of Common Stock and (ii) the denominator of which is such Current
Market Price per share of Common Stock. Such adjustments will be
made successively whenever such a record date is fixed, and in
the event that such distribution is not so made, the Purchase
Price will be adjusted to be the Purchase Price that would have
been in effect if such record date had not been fixed.
(d) The "Current Market Price" per share of Common Stock on
any date will be deemed to be the average of the daily closing
prices per share of such Common Stock for the 30 consecutive
Trading Days immediately prior to such date; provided, however,
that in the event that the Current Market Price per share of the
Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (i) a dividend
or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (ii) any subdivision,
combination, or reclassification of such Common Stock, and the ex-
dividend date for such dividend or distribution, or the record
date for such subdivision, combination, or reclassification has
not occurred prior to the commencement of the requisite 30
Trading Day period, as set forth above, then, and in each such
case, the Current Market Price will be properly adjusted to take
into account ex-dividend trading. The closing price for each day
will be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted
by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in the Common Stock
<PAGE>
selected by the Board of Directors. If on any such date no
market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by
the Board of Directors will be used. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price
per share will mean the fair value per share as determined in
good faith by the Board of Directors, the determination of which
will be described in a statement filed with the Rights Agent and
will be conclusive for all purposes.
(e) Anything in this Agreement to the contrary
notwithstanding, no adjustment in the Purchase Price will be
required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments that by reason of this
Section 11(e) are not required then in effect to be made will be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 will be made
to the nearest cent or to the nearest one-hundredth of a share of
Common Stock. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 will be made no
later than the earlier of (i) three (3) years from the date of
the transaction that mandates such adjustment or (ii) the Final
Expiration Date.
(f) If, as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a), the holder of any Right
thereafter exercised becomes entitled to receive any shares of
capital stock other than Common Stock, then the number of such
other shares so receivable upon exercise of any Right and the
Purchase Price will be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Sections
11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m), and (q) and
the provisions of Sections 7, 9, 10, 13, and 14 with respect to
the Common Stock will apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price under this Agreement
will evidence the right to purchase, at the adjusted Purchase
Price, the number of Rights Shares purchasable from time to time
under this Agreement, all subject to further adjustment as
provided in this Agreement.
(h) Unless the Company has exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and
(c), each Right outstanding immediately prior to the making of
such adjustment will thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of Rights Shares
(calculated to the nearest one-hundredth) obtained by (i)
multiplying (x) the number of Rights Shares covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price
in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of Rights Shares purchasable upon
the exercise of a Right. Each of the Rights outstanding after
such an adjustment in the number of Rights will be exercisable
for the number of Rights Shares for
<PAGE>
which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights will become that number of Rights
(calculated to the nearest one-hundredth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company will make a
public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates
have been issued, will be at least ten Business Days later than
the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company will, as promptly as
practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14, the additional Rights to which
such holders are entitled as a result of such adjustment, or, at
the option of the Company, will cause to be distributed to such
holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to
which such holders are entitled after such adjustment. Rights
Certificates so to be distributed will be issued, executed, and
countersigned in the manner provided for in this Agreement (and
may bear, at the option of the Company, the adjusted Purchase
Price) and will be registered in the names of the holders of
record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the Rights Shares, the Rights Certificates
theretofore and thereafter issued may continue to express the
Purchase Price per Rights Shares and the number of Rights Shares
that were expressed in the initial Rights Certificates issued
under this Agreement.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of
the number of Rights Shares, the Company will take any corporate
action that may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue such number
of fully paid and nonassessable Rights Shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of a record
date for a specified event, the Company may elect to defer until
the occurrence of such event the issuance to the holder of any
Right exercised after such record date the number of Rights
Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of
Rights Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided,
however, that the Company will deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or
securities upon the occurrence of the event requiring such
adjustment.
<PAGE>
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company will be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that, in its good faith judgment, the Board of Directors
of the Company determines it to be advisable in order that any
(i) consolidation or subdivision of the Common Stock, (ii)
issuance wholly for cash of any shares of Common Stock at less
than the current market price, (iii) issuance wholly for cash of
shares of Common Stock or securities that by their terms are
convertible into or exchangeable for shares of Common Stock, (iv)
stock dividends, or (v) issuance of rights, options, or warrants
referred to in this Section 11, hereafter made by the Company to
holders of its Common Stock will not be taxable to such
stockholders.
(n) The Company covenants and agrees that it will not, at
any time after the Distribution Date, (i) consolidate with any
other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o), (ii) merge with,
from, or into any other Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o)), or
(iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger,
or sale there are any rights, warrants, or other instruments or
securities outstanding or agreements in effect that could
reasonably be expected to substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or
(y) prior to, simultaneously with, or immediately after, such
consolidation, merger, or sale, the stockholders of the Person
that constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23
or Section 27, take (or permit any Subsidiary to take) any action
if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the
contrary, in the event that the Company at any time after the
Rights Dividend Declaration Date and prior to the Distribution
Date (i) declares a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivides the
outstanding shares of Common Stock, or (iii) combines the
outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, will be proportionately adjusted
so that the number of Rights thereafter associated with each
share of Common Stock following any such event will equal the
result obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to such event
by a fraction the numerator of which is the total number of
shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which is the total
number of shares of Common Stock outstanding immediately
following the occurrence of such event.
<PAGE>
(q) In the event that the Rights become exercisable
following a Section 11(a)(ii) Event, the Company, by action of a
Requisite Majority, may permit the Rights, subject to Section
7(e), to be exercised for 50% of the shares of Common Stock (or
cash or other securities or assets to be substituted for the
Adjustment Shares pursuant to Section 1l(a)(iii)) that would
otherwise be purchasable under Section 11(a) in consideration of
the surrender to the Company of the Rights so exercised and
without other payment of the Purchase Price. Rights exercised
under this Section 11(q) will be deemed to have been exercised in
full and will be cancelled.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in
Section 11 or Section 13, the Company will (a) promptly prepare a
certificate setting forth such adjustment and a brief statement
of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate, and (c) mail a brief
summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate
representing shares of Common Stock) in accordance with Section
25. The Rights Agent will be fully protected in relying on any
such certificate and on any adjustment contained in such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) Except in a Permitted Transaction, in the event that,
following the Stock Acquisition Date, directly or indirectly, (i)
the Company consolidates with, or merges with, or into, any other
Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(o)), and the Company is not the
continuing or surviving Person of such consolidation or merger;
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o)) consolidates with,
or merges with, or into, the Company, and the Company is the
continuing or surviving corporation of such consolidation or
merger and, in connection with such consolidation or merger, all
or part of the outstanding shares of Common Stock is changed into
or exchanged for stock or other securities of any other Person or
cash or any other property; or (iii) the Company sells or
otherwise transfers (or one or more of its Subsidiaries sells or
otherwise transfers), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o)), then,
and in each such case (except as contemplated by Section 13(d)),
proper provision will be made so that (A) each holder of a Right,
except as provided in Section 7(e) or Section 13(e), will
thereafter have the right to receive, upon the exercise of such
Right at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and
issued, fully paid, nonassessable, and freely tradable shares of
Common Stock of the Principal Party (as defined below), not
subject to any liens, encumbrances, preemptive rights, rights of
first refusal, or other adverse claims, as are equal to the
result obtained by (1) multiplying the then current Purchase
Price by the number of Rights Shares for which a Right is
exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying
the number of such Rights Shares for which a Right was
exercisable immediately
<PAGE>
prior to the first occurrence of a Section 11(a)(ii) Event
by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the
first occurrence of a Section 13 Event, will be referred to as
the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per share of the
Common Stock of such Principal Party on the date of consummation
of such Section 13 Event; (B) such Principal Party will
thereafter be liable for, and will assume, by virtue of such
Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (C) the term "Company" will
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 will
apply only to such Principal Party following the first occurrence
of a Section 13 Event; (D) such Principal Party will take such
steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary
to assure that the provisions of this Agreement will thereafter
be applicable, as nearly as may be, in relation to its shares of
Common Stock thereafter deliverable upon the exercise of the
Rights; and (E) the provisions of Section 11(a)(ii) will be of no
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" means
(i) in the case of any transaction described in clause
(i) or (ii) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such
merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause
(iii) of the first sentence of Section 13(a), the Person
that is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any
such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" will refer to
such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person,
with Common Stock that is and has been so registered,
"Principal Party" will refer to whichever of such Persons is
the issuer of the Common Stock having the greatest aggregate
market value.
(c) The Company will not consummate any such consolidation,
merger, sale, or transfer unless the Principal Party has a
sufficient number of authorized shares of its Common Stock that
have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party
have executed and delivered to the Rights Agent a supplemental
agreement providing for the Principal Party to assume and perform
the terms set forth in Sections 13(A) and (B) and further
providing that, as soon as practicable after the date of any
consolidation, merger, or transfer mentioned in Section 13(a),
the Principal Party will:
<PAGE>
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with
a prospectus at all times meeting the requirements of the
Act) until the Final Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
(d) In the event that the Rights become exercisable under
Section 13(a), the Company, by action of a Requisite Majority,
may agree with the Principal Party that the Principal Party may
permit the Rights to be exercised for 50% of the Common Shares of
the Principal Party that would otherwise be purchasable under
Section 13(a), in consideration of the surrender to the Principal
Party, as the successor to the Company under Section 13(a)(ii),
of the Rights so exercised and without other payment of the
Purchase Price. Rights exercised under this Section 13(e) will
be deemed to have been exercised in full and cancelled.
(e) The provisions of this Section 13 will similarly apply
to successive mergers, consolidations, and sales or other
transfers. In the event that a Section 13 Event occurs at any
time after the occurrence of a Section 11(a)(ii) Event, the
Rights that have not theretofore been exercised will thereafter
become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company will not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in
Section 11(p), or to distribute Rights Certificates that evidence
fractional Rights. In lieu of such fractional Rights, there will
be paid to the registered holders of the Rights Certificates with
regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right will be
the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price of the Rights for any day
will be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the
Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-
counter market, as reported by NASDAQ or such other system then
in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors of the
Company. If on any such date no such
<PAGE>
market maker is making a market in the Rights the fair value
of the Rights on such date as conclusively determined in good
faith by the Board of Directors of the Company will be used.
(b) The Company will not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company
may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as provided in this Agreement an
amount in cash equal to the same fraction of the Current Market
Price of one share of Common Stock as of the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of the Rights,
expressly waives the right to receive any fractional Rights or
any fractional shares upon exercise of a Right, except as
permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
respect of this Agreement are vested in the respective registered
holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock);
and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common
Stock), may, on its own behalf and for its own benefit, enforce,
and may institute and maintain any suit, action, or proceeding
against the Company to enforce, or otherwise act in respect of,
its right to exercise the Rights evidenced by such Rights
Certificate in the manner Provided in such Rights Certificate and
in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will
be entitled to specific performance of the obligations under this
Agreement and injunctive relief against actual or threatened
violations of the obligations under this Agreement of any Person
subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the Rights consents and agrees with the
Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent
if surrendered at the principal office or offices of the Rights
Agent designated for such purposes, duly endorsed or accompanied
by a proper instrument of transfer, and with the appropriate
forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f), the Company
and the Rights Agent may deem and treat the person in whose name
a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the
absolute owner of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates
or the associated Common Stock certificate made by anyone other
than the Company
<PAGE>
or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, will be affected by any notice to
the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent will have any
liability to any holder of a Right or other Person as a result of
its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or
other order, decree, or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory, or administrative
agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of
such obligation; provided, however, the Company will use its
reasonable best efforts to have any such order, decree, or ruling
lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate will
be entitled to vote or receive dividends or be deemed for any
purpose the holder of the number of shares of Common Stock or any
other securities of the Company that may at any time be issuable
on the exercise of the Rights represented thereby, nor will
anything contained in this Agreement or in any Rights Certificate
be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter
submitted to stockholders, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section
25), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights
Certificate have been exercised in accordance with the provisions
of this Agreement.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it under
this Agreement and, from time to time, on demand of the Rights
Agent, its reasonable expenses and counsel fees and disbursements
and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of
its duties under this Agreement. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross
negligence bad faith, or willful misconduct on the part of the
Rights Agent, for anything done or omitted to be done by the
Rights Agent in connection with the acceptance and administration
of this Agreement, including, without limitation, the costs and
expenses of defending against any claim of liability. In no case
will the Rights Agent be liable for special, indirect, incidental
or consequential loss or damage of any kind whatsoever (including
but not limited to lost profits), even if the Rights Agent has
been advised of the possibility of such loss or damage.
(b) The Rights Agent will be protected and will incur no
liability for or in respect of any action taken, suffered, or
omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate
for Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document
<PAGE>
believed by it to be genuine and to be signed, executed,
and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any Person into or with which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent is a party, or any corporation succeeding to the corporate
trust or shareholder services business of the Rights Agent or any
successor Rights Agent, will be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties to this
Agreement; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the
provisions of Section 21. In case at the time such successor
Rights Agent succeeds to the agency created by this Agreement,
any of the Rights Certificates have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates have not been countersigned, any
successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights
Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is
changed and at such time any of the Rights Certificates have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of
the Rights Certificates have not been countersigned, the Rights
Agent may countersign such Rights Certificates either in its
prior name or in its changed name, and in all such cases such
Rights Certificates will have the full force provided in the
Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their
acceptance of such Rights Certificates, will be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel will be full and complete authorization and protection to
the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that
any fact or matter (including, without limitation, the identity
of any Acquiring Person or Adverse Person and the determination
of "Current Market Price") be proved or established by the
Company prior to taking or suffering any action under this
Agreement, such fact or matter (unless other evidence in respect
of such fact or matter is specifically prescribed in this
Agreement) may be deemed to be conclusively proved and
<PAGE>
established by a certificate signed by the Chairman of the
Board, the Chief Executive Officer, the Chief Operating Officer,
the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary, or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate
will be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable under this Agreement
only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent will not be liable for or by reason of
any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify
the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and will
be deemed to have been made by the Company only.
(e) The Rights Agent will not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery of this Agreement (except the due execution of this
Agreement by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its
countersignature); nor will it be responsible for any breach by
the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor will it be
responsible for any adjustment required under the provisions of
Section 11 or Section 13, or responsible for the manner, method,
or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except
with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any such adjustment); nor
will it by any act under this Agreement be deemed to make any
representation or warranty as to the authorization or reservation
of any shares of Common Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares
of Common Stock will, when so issued, be validly authorized or
issued, fully paid, or nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge, and deliver or cause to be performed, executed,
acknowledged, and delivered all such further and other acts
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
under this Agreement from the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer, the President,
any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer of the Company, and to
apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken
or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director,
officer, or employee of the Rights Agent may buy, sell, or deal
in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, contract with or lend money to the Company, or
otherwise act as fully and freely as though it
<PAGE>
were not Rights Agent under this Agreement. Nothing in this
Agreement will preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers vested by this Agreement in it or perform any
duty under this Agreement either itself or by or through its
attorneys or agents, and the Rights Agent will not be answerable
or accountable for any act, default, neglect, or misconduct of
any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect, or misconduct;
provided, however, reasonable care was exercised in the selection
and continued employment of such Person.
(j) No provision of this Agreement will require the Rights
Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties under
this Agreement or in the exercise of its rights if there are
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 or 2 of such
certificate, the Rights Agent will not take any further action
with respect to such requested exercise of transfer without first
consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or
any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days' notice in writing
mailed to the Company, and to each transfer agent of the Common
Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the
Common Stock, by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights
Agent resigns or is removed or otherwise becomes incapable of
acting, the Company will appoint a successor to the Rights Agent.
If the Company fails to make such appointment within a period of
30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who will, with such notice, submit such
holder's Rights Certificate for inspection by the Company), then
any registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by
the Company or by such a court, will be a corporation organized
and doing business under the laws of the United States or a State
of the United States, in good standing, that is authorized under
such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and that
has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $25,000,000. After appointment,
the successor Rights Agent will be vested with the same powers,
rights, duties, and responsibilities as if it had been originally
named as Rights Agent without Further act or deed, except that
the predecessor Rights Agent will deliver and transfer to the
successor Rights Agent any property at the time held by it under
<PAGE>
this Agreement and execute and deliver any further
assurance, conveyance, act, or deed necessary for the purpose.
Not later than the effective date of any such appointment, the
Company will file notice of such appointment in writing with the
predecessor Rights Agent and each transfer agent of the Common
Stock and the Common Stock, and mail a notice of such appointment
in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 2 1,
however, or any defect in such notice, will not affect the
legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the
case may be.
Section 22. Issuance of New Rights Certificate.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, in its discretion, issue
new Rights Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number, kind or class of
shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of
this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date
and prior to the Expiration Date, the Company (a) will, with
respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or
upon the exercise, conversion, or exchange of securities issued
by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale;
provided, however, that (y) no such Rights Certificate will be
issued if, and to the extent that, the Company is advised by
counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to
whom such Rights Certificate would be issued, and (z) no such
Rights Certificate will be issued if, and to the extent that,
appropriate adjustment has otherwise been made in lieu of the
issuance of such Rights Certificate.
Section 23. Redemption and Termination.
(a) The Company may, at its option, by action of a
Requisite Majority, at any time prior to the earlier of (i) the
Distribution Date, or (ii) the Final Expiration Date, redeem all
but not fewer than all the then outstanding Rights at the
Redemption Price (the date of such redemption, the "Redemption
Date"), and the Company, at its option, may pay the Redemption
Price either in cash or Common Stock or other securities of the
Company, deemed by the Board of Directors, in the exercise of its
sole discretion, to be at least equivalent in value to the
Redemption Price.
(b) Immediately upon the action of a Requisite Majority
ordering the redemption of the Rights, evidence of which has been
filed with the Rights Agent and without any further action and
without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights
will be to receive the Redemption Price. Promptly after the
action of a Requisite Majority ordering the redemption of the
Rights, the Company will give notice of such redemption to the
Rights Agent and to the holders of the then outstanding Rights by
mailing such notice to all such holders at each holder's last
address as it appears upon the
<PAGE>
registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent
for the Common Stock. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be
made. Any notice that is mailed in the manner in this Agreement
provided will be deemed given, whether or not the holder receives
such notice. In any case, failure to give such notice by mail,
or any defect in the notice, to any particular holder of Rights
shall not affect the sufficiency of the notice to other holders
of Rights.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its
option, at any time after a Triggering Event, exchange all or
part of the then outstanding and exercisable Rights (which will
not include Rights that have become void pursuant to the
provisions of Section 7(e) hereof) for shares of Common Stock,
each Right being exchangeable for one share of Common Stock,
appropriately adjusted to reflect any transaction specified in
Section 11(a)(i) occurring after the Record Date (such number of
shares of Common Stock issuable in exchange for one Right being
referred to herein as the "Exchange Shares"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan
of the Company or any of its Subsidiaries or any Person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such Plan or any Person who is the
Beneficial Owner of 15% or more of the Common Stock as of the
Rights Dividends Declaration Date or any transferee of any shares
of Common Stock owned by such Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial
Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action
and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such
Rights shall be to receive the Exchange Shares. The Company
shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice that is
mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the, exchange of the
Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common
Stock issued but not outstanding, or authorized but unissued, to
permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be
necessary to authorize additional Common Stock for issuance upon
exchange of the Rights or shall take such other action specified
in Section 11(a)(iii) hereof.
<PAGE>
(d) The Company shall not be required to issue fractions of
shares of Common Stock to distribute certificates which evidence
fractional Common Stock. In lieu of such fractional shares, the
Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional shares would
otherwise be issuable an amount in cash equal to the same
fraction of the Current Market Price of a whole share of Common
Stock. For the purposes of this Subsection (d), the Current
Market Value of a whole share of Common Stock shall be determined
as of the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company proposes, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of
any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of
the Company), or (ii) to offer to the holders of Common Stock
rights or warrants to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock (other than a
reclassification involving only the subdivision of outstanding
shares of Common Stock), or (iv) to effect any consolidation or
merger into, or with any other Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(6)),
or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), or (v)
to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company will give to each
holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26, a notice of such proposed action,
which will specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the
shares of Common Stock, if any such date is to be fixed, and such
notice will be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the shares of Common Stock for
purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the
holders of the shares of Common Stock, whichever is the earlier.
(b) In case of a Triggering Event, then (i) the Company
will as soon as practicable give to each holder of a Rights
Certificate, to the extent feasible and in accordance with
Section 26, a notice of the occurrence of such event, which will
specify the event and the consequences of the event to holders of
Rights under this Agreement, and (ii) all references in Section
25(a) to Common Stock will be deemed thereafter to refer to other
securities, if appropriate.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company will
<PAGE>
be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
American Freightways Corporation
2200 Forward Drive
Harrison, Arkansas 72601
Attention: Chief Executive Officer
with a copy to:
Kutak Rock
Suite 1100
425 West Capitol Avenue
Little Rock, Arkansas 72201-3409
Attention: Richard N. Massey
Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made by the
Company or by the holder of any Rights Certificate to or on the
Rights Agent will be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Wachovia Bank, N.A.
Legal Department
100 N. Main Street
Winston-Salem, NC 27150
Notices or demands authorized by this Agreement to be given
or made by the Company or the Rights Agent to the holder of any
Rights Certificate (or, if prior to the Distribution Date, to the
holder of certificates representing shares of Common Stock) will
be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplement and Amendment. The Company, by
action of its Board of Directors, and the Rights Agent may from
time to time supplement or amend this Agreement without the
approval of any holders of Rights in order to cure any ambiguity,
to correct or supplement any provision contained in this
Agreement that may be defective or inconsistent with any other
provisions in this Agreement, or to make any other provisions in
regard to matters or questions arising under this Agreement that
the Company and Rights Agent may deem necessary or desirable and
that will be consistent with, and for the purpose of fulfilling,
the objectives of the Board of Directors in adopting this
Agreement; provided, however, that following the Stock
Acquisition Date, this Agreement shall not be amended in any
manner that would adversely affect the basic economic terms of
the Rights; provided, further, that, once the Rights are no
longer redeemable in accordance with Section 23 of this
Agreement, no amendment to this Agreement may have the effect of
making the Rights redeemable.
<PAGE>
Section 28. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the
Rights Agent will bind and inure to the benefit of their
respective successors and assigns under this Agreement.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding
at any particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, will be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act as in effect
on the date of this Agreement. The Board of Directors of the
Company (with, where specifically provided for in this Agreement,
the concurrence of the Continuing Directors) will have the
exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board
of Directors (with, where specifically provided for in this
Agreement, the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation,
the right and power to (a) interpret the provisions of this
Agreement, and (b) make all determinations deemed necessary or
advisable for the administration of this Agreement (including,
without limitation, a determination to redeem or not redeem the
Rights, to amend the Agreement or to extend the Distribution
Date). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all
omissions with respect to the foregoing) that are done or made by
the Board of Directors (with, where specifically provided for in
this Agreement, the concurrence of the Continuing Directors) in
good faith, will (x) be final, conclusive, and binding on the
Company, the Rights Agent, the holders of the Rights, and all
other parties, and (y) not subject the Board of Directors or the
Continuing Directors to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement will be construed to give to any Person other than the
Company, the Rights Agent, and the registered holders of the
Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock) any legal or equitable
right, remedy, or claim under this Agreement; and this Agreement
will be for the sole and exclusive benefit of the Company, the
Rights Agent, and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered
holders of the Common stock).
Section 31. Severability. If any term, provision,
covenant, or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants,
and restrictions of this Agreement will remain in full force and
effect and will in no way be affected, impaired, or invalidated;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant,
or restriction is held by such court or authority to be invalid,
void, or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose
or effect of this Agreement, the right of redemption set forth in
Section 23 will be reinstated and will not expire until the Close
of Business on the tenth Business Day following the date of such
determination by the Board of Directors. Without limiting the
foregoing, if any
<PAGE>
provision requiring action by a Requisite Majority is held
by any court of competent jurisdiction or other authority to be
invalid, void, or unenforceable, such determination will then be
made by the Board of Directors of the Company in accordance with
applicable law and the Company's articles of incorporation and by-
laws.
Section 32. Governing Law. This agreement, each Right, and
each Rights Certificate issued under this Agreement will be
deemed to be a contract made under the laws of Arkansas and for
all purposes will be governed by and construed in accordance with
the laws of such state applicable to contracts made and to be
performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts will
for all purposes be deemed to be an original, and all such
counterparts will together constitute but one and the same
instrument.
Section 34. Interpretation. Descriptive headings of the
several Sections of this Agreement are inserted for convenience
only and will not control or affect the meaning or construction
of any of the provisions of this Agreement. References in this
Agreement to Sections and Exhibits are references to the Sections
of and Exhibits to this Agreement unless the context requires
otherwise. In this Agreement, the word "or" is not exclusive.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
Attest: AMERICAN FREIGHTWAYS
/s/Frank Conner CORPORATION
By:/s/Tom Garrison
Name:Tom Garrison
Title:President, Chief Operating
Officer
Attest: WACHOVIA BANK, N.A.
/s/Virginia C. Lakey
Assistant Secretary
By:/s/Deborah N. Keaton
Name:Deborah N. Keaton
Title:Vice President
<PAGE>
Exhibit A to Rights Agreement
Certificate No. R-
[FORM OF RIGHTS CERTIFICATE]
________ Rights
NOT EXERCISABLE AFTER AUGUST 31, 2003 OR EARLIER IF REDEEMED
BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH
IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
AMERICAN FREIGHTWAYS CORPORATION
This certifies that _______________, or registered assigns,
is the registered owner of the number of Rights set forth above,
each of which entitles the owner thereof, subject to the terms,
provisions, and conditions of the Rights Agreement, dated as of
August 26, 1998 (as amended from time to time, the "Rights
Agreement"), between American Freightways Corporation, an
Arkansas corporation (the "Company"), and Wachovia Bank, N.A.
(the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 p.m. (Harrison, Arkansas time) on August 31, 2003
at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one fully paid,
nonassessable share of Common Stock (the "Common Stock") of the
Company, at a purchase price of $25 per share (the "Purchase
Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by
this Rights Certificate (and the number of shares that may be
purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and
Purchase Price as of August 17, 1998 based on the Common Stock as
constituted at such date. As provided in the Rights Agreement,
the Purchase Price and the number and kind of shares of Common
Stock or other securities, that may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are
subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms,
provisions, and conditions of the Rights Agreement, which terms,
provisions, and conditions are incorporated herein by reference
and made a part of this certificate and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties, and immunities
hereunder of the Rights Agent, the Company, and the holders of
the Rights Certificates, which limitations of rights include the
temporary suspension of the exercisability of such Rights under
the certain circumstances set forth in the Rights Agreement.
<PAGE>
Copies of the Rights Agreement are on file at the above-
mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent. All capitalized terms not
otherwise defined have the meaning set forth in the Rights
Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the
Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person, (ii) a transferee of any such
Acquiring Person, Associate, or Affiliate, or (m) under certain
circumstances specified in the Rights Agreement, a transferee of
a Person who, after such transfer, became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person, such Rights
will become null and void and no holder of this certificate will
have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices
of the Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase
a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates
surrendered have entitled such holder to purchase. If this
Rights Certificate is exercised in part, the holder will be
entitled to receive upon surrender of this certificate another
Rights Certificate or Rights Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $0.01 per Right.
In addition, in certain circumstances the Rights may be
exchanged, in whole or in part, for shares of the Common Stock.
Immediately upon the action of the Board of Directors of the
Company authorizing any such exchange, and without any further
action or any notice, the Rights (other than Rights that are not
subject to such exchange) will terminate and the Rights will only
enable holders to receive the shares issuable upon such exchange.
Under certain circumstances set forth in the Rights Agreement,
the decision to redeem the Rights will require the concurrence of
a majority of the Continuing Directors.
No fractional shares of Common Stock will be issued upon the
exercise of any Right or Rights evidenced hereby, but in lieu
thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate will be entitled to
vote or receive dividends or be deemed for any purpose the holder
of shares of Common Stock or of any other securities of the
Company that may at any time be issuable on the exercise hereof,
nor will anything contained in the Rights Agreement or herein be
construed to confer upon the holder of this certificate, as such,
any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate have been exercised as
provided in the Rights Agreement.
<PAGE>
This Rights Certficate will not be valid or obligatory for
any purpose until it has been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal.
Dated as of ____________________
ATTEST: AMERICAN FREIGHTWAYS
CORPORATION
_______________________ By:________________________
Name:______________________
Title:_____________________
Countersigned:
WACHOVIA BANK, N.A.
By:______________________
Authorized Signature
<PAGE>
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby sells, assigns, and tranfer unto
__________________________________________________________________
__________________________________________________________________
(Please print name and address of transferee)
This Rights Certificate, together with all right, title, and
interest therein, and does hereby irrevocably constitute and
appoint _________________ attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full
power of substitution. The undersigned acknowledges that this
Assignment is voidable by the Company if it contains any material
misstatement of fact by the transferor.
Dated:_____________ ____________________________
Signature
Signature Guaranteed:
___________________________
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned, or transferred by or on behalf of a person who is
or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined pursuant to the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________ _______________________
Signature
Signature Guaranteed:
__________________________
<PAGE>
FORM OF ELECTION TO PURCHASE
The signature to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or
enlargement or any change whatsoever.
To: AMERICAN FREIGHTWAYS CORPORATION
The undersigned hereby irrevocably elects to exercise
_________ Rights represented by this Rights Certificate to
purchase the shares of Common Stock issuable upon the exercise of
the Rights (or such other securities of the Company or of any
other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security or other identifying number:
_______________________________________________________
Please print name and address:
_______________________________________________________
_______________________________________________________
If such number of Rights are not all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance
of such Rights will be registered in the name of and delivered
to:
Please insert social security or other identifying number:
_______________________________________________________
Please print name and address:
_______________________________________________________
_______________________________________________________
<PAGE>
The undersigned acknowledges that this Election to Purchase
is voidable by the Company if it contains any material
misstatement of fact by the undersigned.
Dated:______________ _______________________
Signature
Signature Guaranteed:
________________________
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ]
are [ ] are not being exercised by or on behalf of a person who
is or was an Acquiring Person or an Adverse Person or an
Affiliate or Associate of any such Acquiring Person or an Adverse
Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or became an Acquiring Person or Adverse Person or an Affiliate
or Associate of an Acquiring Person or an Adverse Person.
Dated:_______________ _________________________
Signature
Signature Guaranteed:
_________________________
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commecial bank or
trust company having an office or correspondent in the United
States.
<PAGE>
Exhibit B to Rights Agreement
SUMMARY OF RIGHTS TO PURCHASE SHARES OF
AMERICAN FREIGHTWAYS CORPORATION COMMON STOCK
On August 17, 1998, the Board of Directors of American
Freightways Corporation (the "Company") declared a dividend of
one common share purchase right (a "Right") for each outstanding
share of common stock, $.01 par value per share (the "Common
Shares") of the Company. The dividend was made to the
shareholders of record at the close of business on August 31,
1998 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company one Common Share at a price
of $25 (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights
Agreement dated August 26, 1998, (the "Rights Agreement") between
the Company and Wachovia Bank as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) ten business days
following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the
outstanding Common Shares (an "Acquiring Person") or (ii) ten
business days following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by
a person or group of 15% or more of such outstanding Common
Shares (the earlier of such dates being the "Distribution Date"),
the Rights will be evidenced, with respect to any of the Common
Share certificates outstanding as of the Record Date, by such
Common Share certificate with a copy of this Summary of Rights
attached to the certificate. A majority of the Continuing
Directors (not associated with Acquiring Person) may in their
discretion vote to extend the Distribution Date.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the
Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares
outstanding even without such notation or a copy of this Summary
of Rights being attached to such Certificate, will also
constitute the transfer of the Rights associated with the Common
Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing
the Rights (the "Right Certificates") will be mailed to holders
of record of the Common Shares as of the close of business on the
Distribution Date, and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on August 17, 2003 (the "Final Expiration
Date"), unless the Final Expiration Date is extended or unless
the Rights are earlier redeemed by the Company, in each case, as
described below.
The Purchase Price payable and the number of Common Shares
or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a
subdivision, combination, or reclassification of, the Common
Shares, (ii) upon the grant to holders of the Common Shares of
certain rights or warrants to subscribe for or purchase Common
Shares at a price, or securities convertible into Common Shares
with a conversion price, less than the then current market price
of the Common Shares or (iii) upon the distribution to holders of
the Common Shares of evidences of indebtedness or assets or of
subscription rights or warrants (other than those referred to
above).
<PAGE>
In the event that any person or entity (other than an
existing stockholder) becomes an Acquiring Person (the beneficial
owner of 15% or more of the Common Shares), provision will be
made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will then be
void), will have the right to purchase from the Company upon
exercise that number of Common Shares having a market value of
two times the applicable exercise price of the Right.
The Rights Agreement excludes from the definition of
Acquiring Persons, Persons who own in excess of 15% of the Common
Shares on August 17,1998, who certify to the Company that they
inadvertently acquired in excess of 14.9% of the outstanding
Common Shares and thereafter divest such excess Common Shares or
who acquire 15% or more of the Common Shares in a Permitted
Transaction. A "Permitted Transaction" is a stock acquisition or
tender or exchange offer pursuant to a definitive agreement which
would result in a person beneficially owning 15% or more of the
Common Shares and which has been approved by the Board of
Directors (including a majority of the Continuing Directors)
prior to the execution of the agreement or the public
announcement of the offer.
In the event that the Company is acquired in a merger or
other business combination transaction, or 50% or more of its
consolidated assets or earning power are sold, proper provisions
will be made so that each holder of a Right will have the right
to purchase from the acquiring company, upon the exercise of the
Right at the then applicable exercise price, that number of
shares of common stock of the acquiring company that at the time
of such transaction will have a market value of two times the
applicable exercise price of the Right.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
Common Shares will be issued, and, in lieu of such fractional
shares, an adjustment in cash will be made based on the market
price of the Common Shares on the last trading day prior to the
date of exercise.
After a person becomes an Acquiring Person, the Company's
Board of Directors may exchange the Rights, other than those
Rights owned by the Acquiring Person, in whole or in part, at an
exchange ratio of one share of Common Stock per Right, subject to
adjustment. However, the Board of Directors cannot conduct an
exchange at any time after any Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or
more of the outstanding Common Stock.
At any time prior to a Distribution Date, a Requisite
Majority may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the "Redemption Price"). In addition,
the Board of Directors may extend or reduce the period during
which the Rights are redeemable, so long as the Rights are
redeemable at the time of such extension or reduction.
Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of
the Rights, including an amendment to extend the Final Expiration
Date, except that from and after the date any Person becomes an
Acquiring Person, no such amendment may adversely affect the
economic interests of the holders of the Rights.
Until a Right is exercised, the holder of the Right, as
such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive
dividends.
*****
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1998 quarterly consolidated financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,854
<SECURITIES> 0
<RECEIVABLES> 95,753
<ALLOWANCES> 1,794
<INVENTORY> 3,969
<CURRENT-ASSETS> 130,094
<PP&E> 758,314
<DEPRECIATION> 270,389
<TOTAL-ASSETS> 620,176
<CURRENT-LIABILITIES> 104,869
<BONDS> 202,173
0
0
<COMMON> 316
<OTHER-SE> 246,825
<TOTAL-LIABILITY-AND-EQUITY> 620,176
<SALES> 0
<TOTAL-REVENUES> 731,098
<CGS> 0
<TOTAL-COSTS> 688,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 11,861
<INCOME-PRETAX> 31,968
<INCOME-TAX> 12,947
<INCOME-CONTINUING> 19,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,021
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<FN>
<F1>Provision for Doubtful accounts included in costs and expenses applicable
to revenues.
</FN>
</TABLE>
