Delta Airlines 2003 Annual Report Download - page 120

Table of Contents
below provide for cumulative dividends on that stock and prohibit the payment of dividends on our common stock until all cumulative dividends on the ESOP
Preferred Stock have been paid. Unpaid dividends on the ESOP Preferred Stock will accrue without interest, until paid, at a rate of $4.32 per share per year.
At December 31, 2003, accumulated but unpaid dividends on the ESOP Preferred Stock totaled $13 million and are recorded in accounts payable, deferred
credits and other accrued liabilities on our Consolidated Balance Sheet.
ESOP Preferred Stock
Each outstanding share of ESOP Preferred Stock bears a cumulative cash dividend of 6% per year of its stated value of $72.00; is convertible into 1.7155
shares of common stock, which is equivalent to a conversion price of $41.97 per share; and has a liquidation preference of $72.00, plus accrued and unpaid
dividends. The ESOP Preferred Stock generally votes together as a single class with the common stock and has two votes per share. The conversion rate,
conversion price and voting rights of the ESOP Preferred Stock are subject to adjustment in certain circumstances.
All shares of ESOP Preferred Stock are held of record by the trustee of the Delta Family-Care Savings Plan (see Note 11). At December 31, 2003, 10,018,019
shares of common stock were reserved for issuance for the conversion of the ESOP Preferred Stock.
We are generally required to redeem shares of ESOP Preferred Stock (1) to provide for distributions of the accounts of Savings Plan participants who
terminate employment with us and request a distribution and (2) to implement annual diversification elections by Savings Plan participants who are at least
age 55 and have participated in the Savings Plan for at least 10 years. In these circumstances, shares of ESOP Preferred Stock are redeemable at a price equal
to the greater of (1) $72.00 per share or (2) the fair value of the shares of common stock issuable upon conversion of the ESOP Preferred Stock to be
redeemed, plus, in either case, accrued and unpaid dividends on such shares of ESOP Preferred Stock (Redemption Price). Under the terms of the ESOP
Preferred Stock, we may pay the Redemption Price in cash, shares of common stock (valued at fair market value), or in a combination thereof.
Delaware law, however, prohibits a company from redeeming or purchasing its stock for cash or other property, unless the company has sufficient "surplus".
As discussed above, at December 31, 2003, we had a negative "surplus". Accordingly, effective December 2003, our Board of Directors changed the form of
payment we use to redeem shares of the ESOP Preferred Stock when redemptions are required under our Delta Family-Care Savings Plan. For the indefinite
future, we will pay the Redemption Price in shares of our common stock rather than in cash.
Shareowner Rights Plan
The Shareowner Rights Plan is designed to protect shareowners against attempts to acquire Delta that do not offer an adequate purchase price to all
shareowners, or are otherwise not in the best interest of Delta and our shareowners. Under the plan, each outstanding share of common stock is accompanied
by one-half of a preferred stock purchase right. Each whole right entitles the holder to purchase 1/100 of a share of Series D Junior Participating Preferred
Stock at an exercise price of $300, subject to adjustment.
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