<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
AMERICA WEST HOLDINGS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[America West Holdings Letterhead]
April 3, 1997
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the Annual Meeting of Stockholders of America West Holdings Corporation
to be held at the Arizona Historical Society Museum, 1300 N. College Avenue, in
Tempe, Arizona on May 2, 1997, at 10:00 a.m. (Mountain Standard Time). A Notice
of the Meeting, Proxy Statement and form of proxy are enclosed with this letter.
We hope that you will be able to attend the annual meeting. Your vote is
important. If you cannot be present, please execute and return the proxy card in
the enclosed envelope so that your shares will be represented. If your shares
are not registered in your own name and you would like to attend the meeting,
please ask the broker, trust, bank or other nominee that holds the shares to
provide you with evidence of your share ownership. We look forward to seeing you
at the meeting.
Sincerely,
/s/ William A. Franke
William A. Franke
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
AMERICA WEST HOLDINGS CORPORATION
51 W. THIRD STREET
TEMPE, ARIZONA 85281
------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 1997
------------------------
TO THE STOCKHOLDERS:
The 1997 Annual Meeting of Stockholders of America West Holdings
Corporation (the "Company") will be held at the Arizona Historical Society
Museum, 1300 N. College Avenue, in Tempe, Arizona on May 2, 1997, at 10:00 a.m.
(Mountain Standard Time) for the following purposes:
1. To elect 15 directors, each to serve for a term of one year and
until his or her successor shall have been properly elected and
shall qualify;
2. To amend the America West 1994 Incentive Equity Plan by increasing
the maximum number of shares of the Company's Class B Common Stock
available under the Plan from 3.5 million to 7.5 million; and
3. To transact any other business as may properly come before the
meeting or any adjournment or postponement thereof.
The holders of record of the Company's common stock at the close of
business on March 14, 1997 are entitled to notice of and to vote at the meeting
with respect to all proposals. We urge you to sign and date the enclosed proxy
and return it promptly by mail in the enclosed envelope, whether or not you plan
to attend the meeting in person. No postage is required if mailed in the United
States. If you do attend the meeting in person, you may withdraw your proxy and
vote personally on all matters brought before the meeting.
By Order of the Board of Directors
/s/ Patricia Penwell
Patricia Penwell
Corporate Secretary
Tempe, Arizona
April 3, 1997
<PAGE> 4
AMERICA WEST HOLDINGS CORPORATION
51 W. THIRD STREET
TEMPE, ARIZONA 85281
------------------------
PROXY STATEMENT
------------------------
MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 1997
------------------------
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of
America West Holdings Corporation ("Holdings" and, together with its wholly
owned subsidiary America West Airlines, Inc., the "Company" or "America West")
for use at the Annual Meeting of Stockholders of the Company or any adjournment
thereof (the "Meeting") to be held at the Arizona Historical Society Museum,
1300 N. College Avenue, in Tempe, Arizona on May 2, 1997, at 10:00 a.m.
(Mountain Standard Time), for the purposes set forth in the notice attached
hereto. This Proxy Statement and the accompanying proxy are being mailed to
stockholders on or about April 3, 1997.
Effective midnight December 31, 1996, America West Airlines, Inc. ("AWA")
became a direct wholly owned subsidiary of Holdings. Each share of Class A
Common Stock of AWA was exchanged for one share of Class A Common Stock of
Holdings and each share of Class B Common Stock of AWA was exchanged for one
share of Class B Common Stock of Holdings. Each Warrant, which previously
entitled the holder to purchase from AWA one share of Class B Common Stock of
AWA, now entitles the holder to purchase from AWA one share of Class B Common
Stock of Holdings.
The nominees for director of Holdings and the nominees for director of AWA
are identical. A vote for any nominee to the Board of Directors of Holdings
constitutes a vote for such nominee to also serve as a member of the Board of
Directors of AWA.
THE PROXY
Stockholders submitting proxies may revoke them at any time before they are
voted by notifying Patricia Penwell, Corporate Secretary of the Company, in
writing of such revocation or by execution of a subsequent proxy sent to Ms.
Penwell, Corporate Secretary, America West Holdings Corporation, 51 W. Third
Street, Tempe, Arizona 85281, or by attending the Meeting in person and giving
notice of revocation to the Inspectors of Election at the Meeting. Any such
revocation, or subsequent proxy, must be received prior to the commencement of
voting at the Meeting to be effective. A proxy will be voted in the manner
specified on the proxy, or if no manner is specified, it will be voted in favor
of the proposals set forth in the notice attached hereto.
The Company will bear the costs of this solicitation. The Company has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies for a fee estimated at $6,500, plus reimbursement of out-of-pocket
expenses. In addition to the solicitation of proxies by mail, proxies may also
be solicited by telephone, telex, fax and personal interview by employees and
directors of the Company, none of whom will receive additional compensation
therefor. The Company has also requested brokers or nominees who held common
stock in street name on the record date to forward proxy soliciting material to
the beneficial owners of such stock at the Company's expense.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on March 14, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting. At the close of business on the record date, the Company
had outstanding and entitled to vote 1,200,000 shares of its Class A common
stock, par value $.01 per share ("Class A Common Stock"), and 44,597,298 shares
of its Class B common stock, par value $.01 per share ("Class B Common Stock"
and, together with the Class A Common Stock, the "Common Stock"). The shares of
Common Stock are the Company's only outstanding voting securities.
<PAGE> 5
Subject to certain limitations on voting by non-U.S. citizens, each share
of Class A Common Stock held of record is entitled to 50 votes per share and
each share of Class B Common Stock held of record is entitled to one vote per
share. Holders of Class A Common Stock and Class B Common Stock vote together as
a single class for all matters submitted to a vote of the stockholders. The
presence at the Meeting, in person or by proxy, of the holders of a majority of
the aggregate voting power of the outstanding Common Stock entitled to vote at
the Meeting will constitute a quorum for the transaction of business at the
Meeting. Shares of Common Stock represented by a properly signed and returned
proxy will be counted as present at the Meeting for purposes of determining a
quorum, without regard to whether the proxy is marked as casting a vote or
abstaining. In establishing the presence of a quorum, abstentions and broker
non-votes will be included in the determination of the number of shares
represented at the Meeting.
Proposal 1 (relating to the election of directors) will require a plurality
of the votes cast at the Meeting. Accordingly, abstentions or broker non-votes
will not be included in the tally of votes cast and, therefore, will not affect
the outcome of the election of directors.
All other matters to come before the Meeting (including Proposal 2,
relating to the approval of the proposed amendment to the America West 1994
Incentive Equity Plan) require the affirmative vote of the holders of a majority
of the shares present in person or by proxy at the Meeting and entitled to vote.
Therefore, abstentions will have the same effect as a vote against the proposals
on such matters. Broker non-votes, however, are not included in the tally of
shares present for voting purposes and, therefore, will not affect the outcome
of the voting on any such proposal.
Votes at the Meeting will be tabulated by Inspectors of Election appointed by
the Company.
2
<PAGE> 6
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the outstanding
Common Stock of the Company by (i) each person who is known to the Company to
own beneficially more than 5% of the outstanding Common Stock of America West,
(ii) the five executive officers of the Company named in the Summary
Compensation Table, (iii) each director of the Company, and (iv) all executive
officers and directors of America West as a group. The information set forth in
the following table is as of February 28, 1997, except that it gives effect to
the purchase (effective March 13, 1997) by AWA of all the Warrants to purchase
Class B Common Stock held by TPG Partners, L.P. ("TPG") and its affiliates (see
footnote 3 below).
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS A AND B
BENEFICIALLY OWNED BENEFICIALLY OWNED COMBINED
----------------------- ----------------------- VOTING POWER
BENEFICIAL OWNER(1) NUMBER PERCENTAGE NUMBER PERCENTAGE PERCENTAGE
- ----------------------------------- ---------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
TPG Partners, L.P.(2).............. 941,431 78.5% 1,946,359(3) 4.4% 46.9%(3)
201 Main Street
Suite 2420
Fort Worth, Texas 76102
Continental Airlines, Inc
("Continental")(4)............... 158,569 13.2% 317,140(5) 0.7% 7.9%(5)
2929 Allen Parkway
Houston, Texas 77019
Mesa Air Group, Inc. ("Mesa")...... 100,000 8.3% 1,000,269(6) 2.2% 5.7%(6)
2525 30th Street
Farmington, New Mexico 87401
FMR Corp. ("Fidelity")............. -- -- 4,398,121(7) 9.6% 4.2%(7)
82 Devonshire Street
Boston, MA 02109
Wellington Management Company...... -- -- 6,034,200(8) 13.5% 5.8%(8)
75 State Street
Boston, Massachusetts 02109
The Equitable Companies
Incorporated..................... -- -- 4,722,387(9) 10.6% 4.5%(9)
787 Seventh Avenue
New York, New York 10019
William A. Franke.................. -- -- 829,334(10) 1.9% *
Richard R. Goodmanson.............. -- -- 50,000(11) * *
John R. Garel...................... -- -- 75,000(12) * *
W. Douglas Parker.................. -- -- 75,000(12) * *
Michael A. Vescuso................. -- -- 55,000(13) * *
Julia Chang Bloch.................. -- -- 9,000(14) * *
Stephen F. Bollenbach.............. -- -- 9,000(14) * *
Frederick W. Bradley, Jr........... -- -- 9,000(14) * *
James G. Coulter(15)............... 1,100,000 91.7% 2,272,499(14) 5.1% 54.8%
John F. Fraser..................... -- -- 9,000(14) * *
John L. Goolsby.................... -- -- 14,000(14) * *
Richard C. Kraemer................. -- -- 19,000(14) * *
John R. Power, Jr.................. -- -- 9,000(14) * *
Larry L. Risley(16)................ 100,000 8.3% 1,009,269(14) 2.2% 5.7%
Frank B. Ryan...................... -- -- 9,000(14) * *
Richard P. Schifter(17)............ 941,431 78.5% 1,955,359(14) 4.4% 46.9%
John F. Tierney.................... -- -- 9,000(14) * *
Raymond S. Troubh.................. -- -- 11,500(14) * *
All executive officers and
directors as a group (22
persons)......................... 1,200,000 100.0% 4,579,937(18) 9.9% 60.7%(18)
</TABLE>
- ---------------
* Less than 1%.
(1) Information with respect to each beneficial owner of 5% or more of a class
of the Company's Common Stock is based solely on Schedules 13D or 13G filed
by such beneficial owners with the Securities and Exchange Commission.
Pursuant to a stockholders' agreement dated December 19, 1996 between TPG,
TPG Parallel (as defined below), Air Partners II (as defined below),
Continental, Mesa, certain stockholder representatives and the Company,
shares held by any of such entities could be considered
3
<PAGE> 7
beneficially owned by the other entities. The information below reflects
securities directly held by such entities.
(2) TPG is a Delaware limited partnership whose general partner is TPG GenPar,
L.P., a Delaware limited partnership ("TPG GenPar"). The general partner of
TPG GenPar is TPG Advisors, Inc., a Delaware corporation ("TPG Advisors").
The executive officers and directors of TPG Advisors are: David Bonderman
(director and president), James G. Coulter (director and vice president),
William Price (director and vice president), James O'Brien (vice president,
treasurer and secretary), Richard P. Schifter (vice president) and Richard
A. Ekleberry (vice president). Includes 78,644 shares of Class A Common
Stock and 162,592 shares of Class B Common Stock owned by TPG Parallel I,
L.P., a Delaware limited partnership ("TPG Parallel"), and 82,314 shares of
Class A Common Stock and 170,181 shares of Class B Common Stock owned by
Air Partners II, L.P., a Texas limited partnership ("Air Partners II"). The
general partner of each of TPG Parallel and Air Partners II is TPG GenPar.
No other persons control TPG, TPG GenPar, TPG Advisors, TPG Parallel or Air
Partners II.
(3) Effective as of March 13, 1997, AWA purchased Warrants to purchase
1,584,915, 159,580, and 167,028 shares of Class B Common Stock,
respectively, from TPG, TPG Parallel and Air Partners II, respectively.
Excludes 9,000 shares of Class B Common Stock underlying stock options held
by Mr. Schifter and 9,000 shares of Class B Common Stock underlying stock
options held by Mr. Coulter.
(4) Mr. Bonderman and Mr. Price are directors of Continental. Messrs. Bonderman
and Coulter, through their control positions in Air Partners, L.P., a
special purpose partnership formed in 1992 to participate in the funding of
the reorganization of Continental and a significant shareholder in
Continental, may be deemed to own beneficially a significant percentage of
Continental's common stock.
(5) Excludes 9,000 shares of Class B Common Stock underlying stock options held
by Mr. Coulter.
(6) Includes 799,767 shares of Class B Common Stock that may be acquired upon
the exercise of Warrants by Mesa. Excludes 9,000 shares of Class B Common
Stock underlying stock options held by Mr. Risley.
(7) As of March 13, 1997, includes 991,721 shares of Class B Common Stock that
may be acquired upon the exercise of Warrants. The Class B Common Stock and
Warrants are owned directly by various funds and accounts advised by
Fidelity Management & Research Company ("FMRC"), Fidelity International
Limited ("FIL"), or Fidelity Management Trust Company ("FMTC"). 3,401,300
shares of Class B Common Stock are beneficially owned by FMRC, a wholly
owned subsidiary of FMR Corp. and an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, as a result of its
serving as an investment advisor to various investment companies registered
under Section 8 of the Investment Company Act of 1940 and to certain other
funds which are generally offered to limited groups of investors. 834,621
shares of Class B Common Stock are beneficially owned by FMTC, a wholly
owned subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 ("Exchange Act"), as a result of its
serving as trustee or managing agent for various private investment
accounts, primarily employee benefit plans and serving as investment
advisor to certain other funds which are generally offered to limited
groups of investors. 210,400 shares of Class B Common Stock are
beneficially owned by FIL, a majority owned subsidiary of FMRC, as a result
of its serving as investment adviser to various non-U.S. investment
companies. FMR Corp. has sole voting power with respect to 768,821 shares
and sole dispositive power with respect to 4,187,721 shares. FIL has sole
voting and dispositive power with respect to all the shares it beneficially
owns.
(8) Includes shares owned by numerous investment advisory clients of Wellington
Trust Company, NA, a wholly owned subsidiary of Wellington Management
Company, LLP ("Wellington"). Wellington, in its capacity as investment
advisor, may be deemed to beneficially own such shares.
(9) Includes 1,491,400 shares held by The Equitable Life Assurance Society of
the United States, 3,221,040 shares held by Alliance Capital Management
L.P. and 9,947 shares held by Donaldson, Lufkin & Jenrette Securities
Corporation.
(10) Excludes 171,000 shares underlying stock options that are not exercisable
within 60 days of the date hereof.
4
<PAGE> 8
(11) Excludes 350,000 shares underlying stock options that are not exercisable
within 60 days of the date hereof.
(12) Excludes 125,000 shares underlying stock options held by each of Mr. Garel
and Mr. Parker that are not exercisable within 60 days of the date hereof.
(13) Excludes 125,000 shares underlying stock options held by Mr. Vescuso that
are not exercisable within 60 days of the date hereof. Mr. Vescuso has
advised the Company of his intent to retire from the Company upon
appointment of his successor.
(14) Includes 9,000 shares of Class B Common Stock that may be acquired upon
exercise of stock options.
(15) Includes shares of Class A Common Stock and Class B Common Stock
beneficially owned by TPG, TPG Parallel, Air Partners II and Continental.
In connection with Mr. Coulter's positions described in footnotes (2) and
(4) above, Mr. Coulter may be deemed to own beneficially such shares. Mr.
Coulter disclaims beneficial ownership of such shares.
(16) Includes shares of Class A Common Stock and Class B Common Stock
beneficially owned by Mesa. Through his position as chairman and chief
executive officer of Mesa, Mr. Risley may be deemed to own beneficially
such shares. Mr. Risley disclaims beneficial ownership of such shares.
(17) Includes shares of Class A Common Stock and Class B Common Stock
beneficially owned by TPG, TPG Parallel and Air Partners II. In connection
with Mr. Schifter's position described in footnote (2) above, Mr. Schifter
may be deemed to own beneficially such shares. Mr. Schifter disclaims
beneficial ownership of such shares.
(18) Includes 1,774,102 shares of Class B Common Stock that may be acquired upon
exercise of Warrants and stock options.
GENERAL INFORMATION
ROLE OF THE BOARD OF DIRECTORS
The Board of Directors establishes the broad policies of the Company and is
responsible for the overall performance of the Company. The Board is comprised
of 15 directors with a broad range of domestic and international financial,
management and business expertise. Certain of the Company's principal
stockholders are parties to a stockholders' agreement relating to the
composition of the Company's Board of Directors. See "Stockholders' Agreement"
below.
The Board held nine meetings during 1996. Each incumbent director attended
at least 75% of the meetings in 1996 of the Board and the committees on which
such director serves except Messrs. Bollenbach, Coulter and Fraser, who attended
73%, 72% and 67%, respectively, of the aggregate number of Board and committee
meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has four standing committees: a Compensation/Human Resources
Committee (the "Compensation Committee"), an Audit Committee, an Executive
Committee and a Special Committee. The Company does not maintain a standing
nominating committee.
The Compensation Committee, comprised of Ms. Bloch, Messrs. Kraemer
(Chair), Bollenbach, Bradley and Schifter, reviews all aspects of compensation
and promotion of officers of the Company and matters relating to employee
compensation generally and significant employee benefit plans and programs,
including the America West 1994 Incentive Equity Plan. In 1996, the Compensation
Committee met eight times.
The Audit Committee, comprised of Messrs. Goolsby (Chair), Risley, Ryan and
Troubh, recommends selection of the Company's independent auditors, reviews the
financial statements of the Company and considers such other matters relating to
the internal and external audits of the financial affairs of the Company as may
be necessary. In 1996, the Audit Committee met five times.
5
<PAGE> 9
The Executive Committee, comprised of Messrs. Franke (Chair), Bradley,
Coulter and Power, has all of the powers of the Board of Directors in the
management of the affairs and business of the Company during the intervals
between meetings of the full Board, subject to certain limitations. The
Executive Committee met nine times in 1996, and addressed various matters as to
which it was felt unnecessary to convene the entire Board, including, at the
Board's direction, approval of individual transactions pursuant to the Company's
stock repurchase plan.
The Special Committee, comprised of Messrs. Bradley (Chair), Bollenbach,
Goolsby and Kraemer, considers, as and when presented to it by senior
management, potential acquisition or investment transactions outside the
ordinary course of the Company's business. The Special Committee is not
authorized to initiate or approve any transaction on behalf of the Company. The
Special Committee met five times in 1996.
DIRECTOR COMPENSATION
At its December 1996 meeting, the Board of Directors voted to change the
way non-employee directors are compensated. These changes, discussed below, are
intended to align more closely the financial interests of America West's
non-employee directors (directors who are not officers or employees of the
Company) with those of common stockholders in general by increasing the amount
of annual compensation paid in stock and by setting a target for stock ownership
by all non-employee directors (as discussed below).
For 1996, each non-employee director received an annual retainer of $15,000
plus $1,000 for each Board or committee meeting attended and was automatically
granted, pursuant to the America West 1994 Incentive Equity Plan, an option to
purchase 3,000 shares of Class B Common Stock at the closing market price per
share on the date of grant. For 1997 and each subsequent year of service, each
non-employee director will receive an annual cash retainer of $10,000 plus
$1,000 for each Board or committee meeting attended and (i) will be
automatically granted, pursuant to the America West 1994 Incentive Equity Plan
(as amended through and in effect on January 1, 1997, the "Incentive Plan"), an
option to purchase 3,000 shares of Class B Common Stock at the closing market
price per share on the date of grant and (ii) subject to stockholder approval of
the proposed amendment described in PROPOSAL 2, will be automatically awarded,
pursuant to the Incentive Plan, that number of unrestricted shares of Class B
Common Stock determined by dividing $13,000 by the closing market price per
share on December 31 of the preceding year. Pursuant to the Incentive Plan, each
new non-employee director will automatically receive on the date of initial
election or appointment an option to purchase 3,000 shares of Class B Common
Stock at the closing market price per share on the date of grant. Effective
January 1, 1997, Holdings established a stock ownership goal, attainable over a
five-year period, of $115,000 for each non-employee director. For purposes of
such goal, shares of Class B Common Stock are valued at the current market value
and vested options are valued at 50% of the exercise price.
The Company's non-employee directors, their spouses or companions and their
dependant children are provided transportation on AWA and reimbursement for
federal and state income taxes incurred thereon. During 1996, the average value
of this transportation was approximately $1,200 per director.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information for the years ended December 31,
1996, 1995 and 1994 with respect to compensation for services to America West
paid to (i) the chief executive officer and (ii) the four highest paid executive
officers (other than the chief executive officer) based on 1996 salaries and
bonuses (collectively, the "Named Executive Officers").
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------
----------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) AWARD(S) OPTIONS/SARS COMPENSATION
- --------------------------- ---- -------- -------- --------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William A. Franke(1)....... 1996 $500,000 -- $84,504 $1,849,500(3) 71,000 $ 8,465(4)
Chairman of the Board and 1995 $300,000 -- -- $ 235,089(3) 300,000 $ 9,255
Chief Executive Officer
of 1994 $450,000 -- $ 5,625 $ 96,250(3) 355,000 $1,224,375(5)
Holdings; Chairman of the
Board of AWA
Richard R. Goodmanson(1)... 1996 $216,667 -- -- $ 981,250(6) 350,000 $ 175,807(7)
President of Holdings;
President and Chief
Executive Officer of AWA
John R. Garel(1)........... 1996 $216,667 -- -- -- 85,000 $ 1,050(8)
Senior Vice President- 1995 $141,670 $ 97,639 -- -- 115,000 $ 139,923(9)
Marketing and Sales of
AWA
W. Douglas Parker(1)....... 1996 $211,667 -- -- -- 85,000 $ 95,940(10)
Senior Vice President and 1995 $108,625 $ 73,964 -- -- 115,000 $ 59,166(11)
Chief Financial Officer
of AWA and Holdings
Michael A. Vescuso(1)...... 1996 $203,333 -- -- -- 85,000 $ 5,137(12)
Senior Vice President- 1995 $188,750 $136,000 -- -- 30,000 $ 10,980
Human Resources 1994 $ 22,211 -- -- -- 85,000 $ 11,184
of AWA
</TABLE>
- ---------------
(1) Prior to February 4, 1997, Mr. Franke served as Chief Executive Officer and
President of AWA and as President of Holdings. Mr. Goodmanson joined the
Company in June 1996. On February 4, 1997, Mr. Goodmanson was elected Chief
Executive Officer and President of AWA and President of Holdings. Messrs.
Garel and Parker joined the Company during 1995. Mr. Vescuso joined the
Company during 1994. Salary amounts for the year of initial employment
reflect payments for the portion of such year the executive officer was
employed by the Company. Bonuses granted to the officers who joined the
Company after March 31, 1995 were prorated for the portion of the year
employed by the Company. Mr. Vescuso has announced that he will resign from
the Company effective upon designation of his successor.
(2) For 1996, of the Named Executive Officers, only Mr. Franke received
perquisites or other personal benefits in an aggregate amount in excess of
the lesser of $50,000 or 10% of their respective annual salaries. Mr.
Franke's other annual compensation includes a premium paid by the Company
for whole life insurance of $72,054.
(3) Reflects restricted grants pursuant to the Incentive Plan of 11,000 shares
in December 1994, 30,334 shares in January 1995, and 108,000 shares in
January 1996. The aggregate market value of restricted stock holdings at
December 31, 1996 was $2,370,677. The 1994 and 1995 grants are fully
vested. The 1996 grant vests at a rate of 3,000 shares per month starting
January 1996, becoming fully vested on December 31, 1998.
(4) Reflects premium paid by Company for term life insurance for Mr. Franke of
$4,870 and matching contributions made by the Company under its 401(k) plan
of $3,595.
(5) Includes 125,000 shares of Class B Common Stock issued to Mr. Franke
pursuant to Bankruptcy Court order as a success bonus following AWA's
emergence from bankruptcy in 1994.
(6) Reflects restricted grant pursuant to the Incentive Plan of 50,000 shares
in June 1996. The aggregate market value of restricted stock holdings at
December 31, 1996 was $793,750.
(7) Includes a payment of $100,000 to Mr. Goodmanson upon his joining the
Company to compensate for benefits foregone in connection with his
resignation from his prior employer. Also includes reimbursement for moving
expenses of $74,427 and premium paid by the Company for term life insurance
of $1,380.
(8) Reflects premium paid by the Company for term life insurance for Mr. Garel
of $1,050.
(9) Includes a bonus of $50,000 paid to Mr. Garel upon his joining the Company
and reimbursement for moving expenses of $73,900.
(10) Reflects premium paid by the Company for life insurance for Mr. Parker of
$600 and reimbursement for moving expenses of $95,340.
(11) Amount includes a bonus of $45,000 paid to Mr. Parker upon his joining the
Company.
(12) Reflects premium paid by the Company for term life insurance for Mr.
Vescuso of $1,485 and matching contributions made by the Company under its
401(k) plan of $3,652.
7
<PAGE> 11
STOCK OPTIONS
The following table reflects certain information regarding stock options
granted to the Named Executive Officers during 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) IN 1996 PRICE DATE PRESENT VALUE(5)
- ------------------------------ ---------- ------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
William A. Franke............. 71,000(2) 3.5% $12.000 10/28/06 $ 355,333
Richard R. Goodmanson......... 250,000(3) 12.1% $19.625 5/22/06 $2,046,175
100,000(4) 4.9% $12.000 10/28/06 $ 500,470
John R. Garel................. 25,000(3) 1.2% $20.875 2/26/06 $ 217,650
60,000(4) 2.9% $12.000 10/28/06 $ 300,282
W. Douglas Parker............. 25,000(3) 1.2% $20.875 2/26/06 $ 217,650
60,000(4) 2.9% $12.000 10/28/06 $ 300,282
Michael A. Vescuso............ 25,000(3) 1.2% $20.875 2/26/06 $ 217,650
60,000(4) 2.9% $12.000 10/28/06 $ 300,282
</TABLE>
- ---------------
(1) All options were granted under the Incentive Plan.
(2) Option vests over a twenty-six month period.
(3) Option vests over a three-year period.
(4) Option vests over a four-year period.
(5) The value has been calculated using a variation of the Black-Scholes stock
option valuation methodology. The applied model assumed a stock price
volatility of 43.13%, a risk-free rate of return of 6.3% and no dividends.
Options have an exercise period of ten years; however, the estimated
effective option life for each person is approximately four years from the
date of the grant.
OPTION EXERCISES AND HOLDINGS
The following table reflects certain information regarding the number of
unexercised options held by the Named Executive Officers and outstanding at
December 31, 1996. No options were exercised by the Named Executive Officers
during the year ended December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996
AND YEAR END 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
YEAR END 1996 AT YEAR END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William A. Franke........................ 555,000 171,000 $2,979,375 $ 275,125
Richard R. Goodmanson.................... -- 350,000 -- $ 387,500
John R. Garel............................ 38,334 161,666 $ 231,880 $ 696,245
W. Douglas Parker........................ 38,334 161,666 $ 207,088 $ 646,663
Michael A. Vescuso....................... 46,667 133,333 $ 291,252 $ 494,373
</TABLE>
- ---------------
(1) Based on the excess of the option exercise prices over the closing sales
price of the Class B Common Stock on the New York Stock Exchange on December
31, 1996 ($15.875 per share).
8
<PAGE> 12
PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Class B Common Stock with the cumulative total return
of the S&P 500 Index and the S&P Airlines Index since August 26, 1994, the date
on which the Company's Class B Common Stock was issued in connection with the
Company's emergence from bankruptcy and the commencement of trading on the New
York Stock Exchange.
This performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURNS*
<TABLE>
<CAPTION>
Am. West S&P Airlines** S&P 500**
<S> <C> <C> <C>
8/26/94 100 100 100
9/30/94 87.6 87.4 97.7
12/31/94 52.9 83.5 96.9
3/31/95 57 99.5 105.7
6/30/95 80.2 122 115
9/29/95 102.5 120 123.4
12/29/95 112.4 121.9 130
3/31/96 141.3 144.7 136.2
6/28/96 145.5 147.6 141.5
9/30/96 77.7 126.1 145.1
12/31/96 105 133.52 156.3
</TABLE>
* Assumes $100 invested on August 26, 1994 in each of the Class B
Common Stock of the Company, the S&P Airlines Index and the S&P 500
Index (dividends reinvested).
** Prepared by Standard & Poor's Composite, a division of McGraw Hill.
COMPENSATION COMMITTEE REPORT
The Company's compensation program for all executive officers, including
the Named Executive Officers, is administered by the Compensation Committee. The
Compensation Committee currently consists of five members, none of whom is a
current or former employee or officer of the Company and one of whom is
affiliated with TPG, which, as indicated under "Principal Stockholders" above,
is a principal stockholder of the Company.
Set forth below is a report submitted by the current Compensation Committee
addressing the Company's executive compensation program.
General
The Company's executive compensation program consists of (i) an annual
compensation plan, the principal elements of which are base salaries and annual
incentive bonuses and (ii) the America West 1994
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<PAGE> 13
Incentive Equity Plan (as amended through and in effect on January 1, 1997, the
"Incentive Plan"), a long-term compensation plan under which executives and
other key salaried employees may be awarded stock-based compensation, including
stock options, stock appreciation rights, restricted stock, unrestricted stock,
phantom shares, performance units and cash tax rights.
The Compensation Committee meets regularly throughout the year to review
general compensation issues and determines the compensation of all officers and
other key salaried employees of the Company. The Compensation Committee conducts
a comprehensive review of the Company's compensation program, including (i)
annually, consultation with an independent consultant and an internal report
evaluating executive compensation to ensure consistency and program
effectiveness, including the relationship of executive pay to performance and
(ii) every two to three years, a comprehensive report from an independent
consultant (retained by the Compensation Committee) relating to the
competitiveness of executive compensation at the Company relative to other major
airlines and other selected public companies of comparable size.
Overall Compensation Philosophy and Objectives
The principal objectives of the Company's executive compensation program
are (i) to motivate executives to achieve the Company's strategic, operating and
financial goals, (ii) to provide alignment between employee and shareholder
interests through stock-based compensation and annual performance bonuses, (iii)
to attract and retain high quality employees, and (iv) to provide a compensation
package that appropriately recognizes both individual and corporate
contributions. The program is designed to be competitive with other major U.S.
airlines while also reflecting the Company's size and to place more emphasis on
incentive and performance related compensation than on fixed base salaries over
time.
Base Salary
The Compensation Committee reviews base salaries annually. Annual
adjustments are based on several factors, including general levels of market
salary increases, the employee's job classification and the Company's financial
results. Base salaries are also dependent on the Compensation Committee's
subjective evaluation of the performance of the individual employee over time.
Thus, employees with higher levels of performance sustained over time generally
will be paid correspondingly higher base salaries.
The Company's strategy with respect to base salaries for its key salaried
employees is designed, generally, to (i) avoid dramatic changes to base salaries
other than to adjust base salaries over time to reflect market movements and
individual performance and (ii) reduce the emphasis on fixed compensation by
positioning base salaries below industry levels. The Company obtains market
salary data for such purposes. The data is collected with respect to companies
of comparable size to the Company in general industry and the airline industry
using nationally recognized compensation surveys as well as data from proxy
statements for the airlines included in the S&P Airlines Index prepared by
Standard & Poor's Composite, a division of McGraw Hill, and from proxy
statements for certain other select carriers.
Annual Incentive Compensation
The Company's incentive compensation plan, or annual incentive bonus plan,
is the program by which executives and other key salaried employees can earn
additional cash compensation. The amount of each bonus is determined by the
Compensation Committee at the end of each year and is based principally on the
Company's financial performance for the year, on individual performance and job
classification level and on the extent to which base salaries are below industry
levels. The Compensation Committee administers the incentive compensation plan,
recommends to the Board of Directors the aggregate amount of annual incentive
compensation and approves individual awards. In evaluating an individual's
performance, the Compensation Committee may rely on the recommendation of the
Chairman and the Chief Executive Officer, whose recommendations will be based on
their own subjective evaluation of such individual's performance. The Board of
Directors approves the aggregate amount of the incentive compensation awards to
all participants.
The objectives of the Company's annual incentive compensation plan are to
motivate and reward the accomplishment of corporate and individual annual
objectives, reinforce a strong performance orientation with
10
<PAGE> 14
differentiation and variability in individual awards based on contributions to
business results, and enhance rewards for meeting and exceeding corporate and
personal objectives. The Company's financial performance must be at or above
certain threshold levels (determined annually by the Compensation Committee and
the Board of Directors), including a specified amount of earnings before
interest, taxes, depreciation and amortization, before any bonus is awarded
under the Company's annual incentive compensation plan. Because the Company's
financial performance for 1996 did not meet the threshold goal established by
the Compensation Committee and the Board of Directors, no payments were made to
executives under the Company's annual incentive compensation plan for 1996.
Mr. Franke does not participate in the Company's annual incentive
compensation plan. Instead, as described elsewhere in this report and as
provided by his employment agreement, his compensation package places greater
emphasis on long-term equity incentives such as restricted stock grants and
stock options.
Stock-Based Compensation
In 1996, stock-based awards were granted to numerous salaried employees and
to non-employee directors. Such awards consist solely of (i) non-qualified stock
options granted to executives (including Messrs. Franke and Goodmanson) and
other key salaried employees for an aggregate of 2,019,000 shares of Class B
Common Stock, (ii) 108,000 shares of restricted stock awarded to Mr. Franke
pursuant to his employment agreement, (iii) 50,000 shares of restricted stock
awarded to Mr. Goodmanson upon his joining the Company and (iv) non-qualified
stock options granted to 13 non-employee directors for an aggregate of 39,000
shares of Class B Common Stock.
The primary purpose of stock-based awards made under the Incentive Plan is
to compensate the recipients in a way that provides a long-term incentive for
future performance, thus linking the interests of the recipients with the
long-term interests of the stockholders of the Company. In addition, in order to
further align the interests of management with the stockholders of America West,
the Company recently adopted stock ownership guidelines providing for ownership
of Common Stock by executives at multiples of annual salary as provided in the
following table:
STOCK OWNERSHIP GUIDELINES FOR EXECUTIVES
<TABLE>
<CAPTION>
TITLE OF EXECUTIVE MULTIPLE OF ANNUAL SALARY
--------------------------------------- -------------------------
<S> <C>
Chairman of the Board 5 times
President 3 times
Senior Vice President 1.5 times
Vice President 0.75 times
</TABLE>
For purposes of the guidelines, shares of unrestricted stock and shares of
restricted stock (regardless of vesting status) are valued at current market
price and vested stock options are valued at 50% of the exercise price. Each
executive has three years to achieve the applicable ownership guideline. The
guidelines are subject to periodic review by the Compensation Committee and the
Board of Directors.
Stock Options. Stock options are an integral part of the Company's
executive compensation program. The Compensation Committee believes that stock
options are an important and appropriate incentive to employees to meet the
Company's long-term goals. By working to increase the Company's stock value, one
of the Company's performance goals is met, and the executives and employees are
likewise compensated through option value. The Compensation Committee determines
the number of options to be granted to an individual based upon a variety of
factors, including (i) the individual's job classification level and the extent
to which the base salary amount fixed for such job classification level is below
industry levels, (ii) an evaluation of the individual's performance, (iii) the
longevity in office of the individual, (iv) a subjective evaluation of the
individual's retention value to the Company and (v) the results of the various
compensation surveys described above. No mathematical weighting formulae will be
applied with respect to any of these factors, although the individual's job
classification level will normally be a primary factor.
11
<PAGE> 15
The Incentive Plan permits the Compensation Committee, in awarding a stock
option to an employee, to specify (i) the number of shares covered by such
option, (ii) within certain parameters, the manner in which the exercise price
shall be payable to the Company, (iii) the required period or periods of
continuous service with the Company and the corporate performance objectives (if
any) to be achieved before the option can be exercised in whole or in part, (iv)
whether such option will be an incentive stock option or a non-qualified stock
option or a combination thereof and (v) the period (not to exceed 10 years from
the grant date) during which the option may be exercised. With respect to all
options granted under the Incentive Plan, the precise number of shares is
determined partly on a subjective basis. All stock options granted under the
Incentive Plan are exercisable at or above fair market value on the date of
grant and will generally vest over a number of years, dependent on continued
employment. Each grant is made based on the optionee's overall employment
package, without reference to previous stock option grants. The Compensation
Committee has generally imposed a three-year vesting schedule for all grants;
however, the options granted on October 28, 1996 (see below) will vest over a
four-year period or, in the case of the option granted to Mr. Franke, over the
remaining term of his employment agreement. The vesting schedules are designed
to provide an incentive to create stockholder value over time, since the full
benefit of the stock option cannot be realized unless stock appreciation occurs
over a number of years. The options granted to non-employee directors may be
exercised six months after the date of the grant.
The Compensation Committee normally awards stock options to eligible
employees annually during the first quarter of the year at the same time it
reviews and adjusts base salaries. However, in 1996, the Compensation Committee
awarded stock options to employees on two separate occasions. On February 22,
1996, the Compensation Committee awarded options to 33 employees covering an
aggregate of 406,000 shares and on October 28, 1996 the Compensation Committee
awarded options to 46 employees covering an aggregate of 1,041,000 shares. The
options awarded in October are in lieu of the stock options that normally would
be awarded to the recipients during the first quarter of 1997. Accordingly, it
is not anticipated that those employees will receive any stock options in 1997
except in connection with promotions to higher job classification levels. The
stock options awarded on October 28, 1996 are subject to approval by the
Company's stockholders of an increase in the number of shares available under
the Incentive Plan. See "PROPOSAL 2: Amendment to America West 1994 Incentive
Equity Plan." Each option previously granted to an employee will become fully
exercisable in the event of the optionee's termination of employment by reason
of death, disability or retirement or in the event of a "change in control," but
may not be exercised after the tenth anniversary of the date of grant or the
earlier termination of the option.
Mr. Franke has received options to purchase 726,000 shares of Class B
Common Stock in accordance with his employment agreement and pursuant to the
Incentive Plan. In approving these options, the Compensation Committee
considered a variety of factors, including (i) Mr. Franke's job classification
level and base compensation, (ii) a subjective evaluation of Mr. Franke's
performance, including the substantial turnaround of the Company's financial and
operating results since the commencement of Mr. Franke's employment with the
Company in September 1992, (iii) Mr. Franke's level of responsibility within the
Company, (iv) a review of compensation for similarly situated individuals both
in the airline industry and in companies of similar size (based on revenues),
(v) a subjective evaluation of Mr. Franke's ability to lead the Company in
formulating and implementing its long-term business plan, (vi) a subjective
evaluation of Mr. Franke's standing within the Company, in the communities
served by the Company and with the Company's investors and suppliers and (vii) a
subjective evaluation of Mr. Franke's ability to enhance the Company's stock
value and his overall retention value to the Company. In addition, the
Compensation Committee also took into account that, under the terms of his
employment agreement, Mr. Franke does not receive any annual bonuses or other
annual incentive compensation. Effective February 15, 1997, the Company entered
into a new employment agreement with Mr. Franke in replacement of his prior
employment agreement. See "Employment Agreements."
Upon joining the Company in 1996, Mr. Goodmanson was awarded an option to
purchase 250,000 shares of Class B Common Stock. Subsequently, he received an
option to purchase 100,000 shares of Class B Common Stock. In approving these
options, the Compensation Committee considered a variety of factors, including
(i) Mr. Goodmanson's job classification level and base compensation, (ii) Mr.
Goodmanson's level
12
<PAGE> 16
of responsibility within the Company, (iii) a review of compensation for
similarly situated individuals both in the airline industry and in companies of
similar size (based on revenues), (iv) a subjective evaluation of Mr.
Goodmanson's ability to lead the Company in formulating and implementing its
long-term business plan, (v) a subjective evaluation of Mr. Goodmanson's ability
to enhance the Company's stock value and his overall retention value to the
Company and (vi) a subjective evaluation of Mr. Goodmanson's performance during
the first months of his employment with the Company. Effective February 15,
1997, the Company entered into an employment agreement with Mr. Goodmanson. See
"Employment Agreements."
Stock Grants. Restricted stock awards are grants of shares of Class B
Common Stock which carry full stockholder privileges, including the right to
vote and, subject to limitations (if any) established by the Compensation
Committee, the right to receive dividends. No restricted stock awards have been
made by the Compensation Committee except to Mr. Franke in accordance with the
terms of his employment agreement and except to Mr. Goodmanson upon his joining
the Company. In 1996, Mr. Franke and Mr. Goodmanson were awarded 108,000 and
50,000 shares of restricted stock, respectively.
Effective January 1, 1997, the Incentive Plan was amended to provide for
automatic grants of unrestricted stock on December 31 in each year (commencing
December 31, 1997) to each non-employee director who is in office on that day.
Subject to certain limitations, the number of shares included in each annual
grant will be determined by dividing $13,000 by the closing market price of the
Company's Class B Common Stock on December 31 of the year preceding the year of
the grant. The Board approved this amendment as a part of a new compensation
package for non-employee directors. See "General Information -- Director
Compensation."
Other Benefits
The Company has certain broad-based employee benefit plans in which all
employees, including the executives, participate, such as life and health
insurance plans and a 401(k) plan and certain flight benefits. Also, officers of
the Company are provided director/officer liability insurance coverage. The
incremental cost to the Company of such benefits provided under these plans is
not material to the Company. Benefits under these plans are not directly or
indirectly tied to Company or individual performance.
Pursuant to the Company's current severance payment policy for executives,
its executive officers and senior directors are entitled to receive an amount
equal to 200% of the executive officer's base salary and target incentive bonus
(or, in the case of senior directors, 100% of the senior director's base salary
and target incentive bonus) if, within two years of a "change of control" (as
defined in the Incentive Plan), the executive officer or senior director (i) is
asked to resign, (ii) is terminated without cause, or (iii) resigns as the
result of constructive termination.
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
Respectfully submitted,
COMPENSATION/HUMAN RESOURCES
COMMITTEE
Richard C. Kraemer, Chairman
Julia Chang Bloch
Stephen F. Bollenbach
Frederick W. Bradley, Jr.
Richard P. Schifter
13
<PAGE> 17
EMPLOYMENT AGREEMENTS
Effective as of February 15, 1997, the Company entered into an employment
agreement with William A. Franke (which replaces as of such date Mr. Franke's
prior employment agreement). The agreement provides that Mr. Franke will serve
as the Chairman of the Board and Chief Executive Officer of Holdings and as
Chairman of the Board of AWA until December 31, 1998. Under the agreement, Mr.
Franke is to receive an annual cash base salary in the amount of $500,000 for
the period ending June 30, 1997 and $250,000 for the remaining term of his
employment. Mr. Franke's compensation may be increased at the discretion of the
Board of Directors at any time and, after September 30, 1997, may be decreased
at the discretion of the Board of Directors but not below $100,000. The
agreement provides for (i) a $2 million term life insurance policy for the
benefit of beneficiaries designated by Mr. Franke, (ii) certain travel
privileges, (iii) $51,125 per year increasing annually by the consumer price
index as an administrative expense allowance, (iv) certain registration rights
in the event the Company registers a sale of its equity securities and (v) a
severance payment of $1.5 million ($1.0 million after June 30, 1997) payable to
Mr. Franke if the agreement is terminated for certain reasons. The agreement
contains provisions relating to confidentiality of Company information and a
non-competition clause covering a period of 18 months after termination of the
agreement.
In 1994 and 1995, the Company loaned Mr. Franke $470,282 and $203,136,
respectively, for the purpose of enabling him to pay income taxes attributable
to certain grants of Class B Common Stock made to Mr. Franke in 1994 and 1995.
In January 1996, the Company loaned Mr. Franke an additional $40,000 in
connection with such grants. The loans are each payable in two equal
installments on September 26, 2000 and September 26, 2001. The 1994 loan bears
interest (payable semi-annually) at the rate of 8% per annum (11% per annum
after maturity) and the 1995 and 1996 loans bear interest at the rate of 6.02%
per annum (10% per annum after maturity). The loans are secured by a portion of
the shares granted to Mr. Franke, but are otherwise nonrecourse to Mr. Franke.
In 1996, the Company loaned Mr. Franke $644,704 for the purpose of enabling
him to pay income taxes attributable to a grant of Class B Common Stock made to
him in 1996. The loan is payable in two equal installments on September 26, 2000
and September 26, 2001 and bears interest (payable semi-annually) at the rate of
5.65% per annum (10% per annum after maturity). The loan is secured by a portion
of the shares granted to Mr. Franke, but is otherwise nonrecourse to him.
Effective as of February 15, 1997, the Company entered into an employment
agreement with Richard R. Goodmanson which provides that Mr. Goodmanson will
serve as the President of Holdings and as the President and Chief Executive
Officer of AWA until June 17, 1999. Under the agreement, Mr. Goodmanson is to
receive an annual cash base salary in the amount of $500,000, which amount may
be increased at the discretion of the Board of Directors. If requested by Mr.
Goodmanson, the Company has agreed to loan to Mr. Goodmanson up to $600,000 on a
nonrecourse basis for payment of taxes in connection with a restricted stock
grant previously awarded to Mr. Goodmanson under the Incentive Plan, secured by
a pledge of a portion of such stock. The agreement also provides for (i) a
$400,000 term life insurance policy and a $1,000,000 split dollar life insurance
policy for the benefit of beneficiaries designated by Mr. Goodmanson, (ii)
participation in the Company's 401(k) plan, (iii) certain travel and other
privileges, (iv) certain registration rights in the event the Company registers
a sale of its equity securities and (v) a severance payment (not to exceed 150%
of Mr. Goodmanson's base salary) if the agreement is terminated for certain
reasons. The agreement contains provisions relating to confidentiality of
Company information and a non-competition clause covering a period of two years
after termination of the agreement.
Messrs. Franke and Goodmanson are both covered by the Company's current
severance payment policy for executives. See "Compensation Committee
Report -- Other Benefits." However, any severance payment received by either of
them under such policy will automatically reduce the amount of the severance
payment otherwise payable to him under his employment agreement.
STOCKHOLDERS' AGREEMENT
Holdings, TPG, TPG Parallel, Air Partners II, Continental and Mesa (the
"Holders"), and certain designated stockholder representatives are parties to an
agreement (the "Stockholders' Agreement") with respect to certain matters
involving the Company. The agreement provides that, for a period lasting until
the first annual stockholders' meeting after August 25, 1997 (the "Voting
Period"), America West's Board of Directors will be
14
<PAGE> 18
comprised of up to 15 members consisting of (i) nine members designated by the
Holders and (ii) five independent directors (the "Independent Directors")
including (a) three directors designated by the official committee of the
unsecured creditors, (b) one member designated by the official committee of the
equity security holders and (c) one director from among the executive officers
of the Company designated by the Board of Directors as existing prior to
emergence from bankruptcy. The Stockholders' Agreement provides that during the
Voting Period, the Holders will vote all of their shares of Common Stock in
favor of the reelection of the initially designated Independent Directors for as
long as such Independent Directors continue to serve.
The Stockholders' Agreement also requires that no director nominated by the
Holders will be an employee or officer of Continental. All directors who are
selected by or who are directors of Continental or Mesa and all directors who
are employees or officers of Mesa are required by the Stockholders' Agreement to
recuse themselves from voting on or receiving information on any matters
involving negotiations or direct competition between their respective companies
and America West.
In addition, the Stockholders' Agreement requires that, during the Voting
Period, the approval of certain transactions in which the Holders or their
affiliates may participate will require the affirmative vote of the holders of a
majority of the voting power of the outstanding shares of each class of common
stock of the Company entitled to vote, voting as a single class and excluding
any shares owned by the Holders or any of their affiliates (but not excluding
any shares owned by Mesa). Transactions to which such restriction applies
include any merger or consolidation of the Company with or into the Holders or
any of their affiliates, any sale or other disposition of all or a substantial
part of the assets of the Company to the Holders or any of their affiliates and
certain other transactions with or involving the Company in which the Holders or
any of their affiliates would acquire an increased percentage ownership of
voting equity securities in the Company. The stockholder voting requirements
specified above will not apply to a proposed action approved by at least three
Independent Directors, unless otherwise required by applicable law. The Company
does not believe these restrictions will have any adverse effects on the
stockholders of the Company.
Under the terms of the Stockholders' Agreement, neither the Holders nor any
of their affiliates may sell or otherwise transfer any Common Stock (other than
to an affiliate of the transferor) if, after giving effect thereto and any
related transaction, the total number of shares of Class B Common Stock
beneficially owned by the transferor is less than twice the total number of
shares of Class A Common Stock beneficially owned by the transferor, except in
certain circumstances (which include a transfer or disposition of all shares of
Common Stock owned by such person, subject to other applicable provisions of the
Stockholders' Agreement).
In addition, the Stockholders' Agreement requires that, during the Voting
Period, without the prior written consent of the Company given pursuant to a
resolution adopted by the affirmative vote of not less than 75% of all directors
of the Company, the Holders shall not sell, in a single transaction or related
series of transactions, shares of Common Stock representing 51% or more of the
combined voting power of shares of Common Stock then outstanding other than (i)
pursuant to or in connection with a tender or exchange offer for all shares of
Common Stock and for the benefit of all others of Class B Common Stock on a pro
rata basis at the same price per share and on the same economic terms, (ii) to
any affiliate of the Holders, (iii) pursuant to a bankruptcy or insolvency
proceeding, (iv) pursuant to judicial order, legal process, execution or
attachment, (v) in a public offering or (vi) in any other transaction where the
purchase price per share is equal to or less than the then-current market price
per share.
CERTAIN TRANSACTIONS
AWA has entered into certain alliance agreements with Continental and Mesa
(the "Alliance Agreements"). The Alliance Agreements are designed to enhance
AWA's growth in revenue passenger miles and operating results. Continental and
Mesa are principal stockholders of the Company. See "Principal Stockholders."
AWA entered into several agreements with Continental in 1994 and 1995 to
implement code sharing arrangements and to coordinate ground handling
operations. AWA paid Continental approximately $21.7 million and received
approximately $13.0 million from Continental for such services in 1996. In
September 1992, prior to Mesa becoming a significant stockholder, AWA entered
into a code sharing agreement with Mesa. Pursuant to this agreement, which
establishes Mesa as a feeder carrier for AWA at its hub in Phoenix,
15
<PAGE> 19
AWA assesses a per passenger charge for facilities, reservations and other
services from Mesa for enplanements on the Mesa system. Such payments by Mesa to
AWA totalled approximately $3.5 million for 1996.
In the second quarter of 1996, AWA prepaid $25 million of its 10 3/4%
Senior Unsecured Notes due 2005 held by Fidelity. Fidelity is one of the
Company's principal stockholders. See "Principal Stockholders."
In February 1996, the Company helped facilitate the sale by certain
principal stockholders of 7,243,000 shares of its Common Stock pursuant to the
Company's shelf registration statement filed with the Securities and Exchange
Commission (File No. 333-02129). The stockholders participating in such sale
were TPG, TPG Parallel, Air Partners II, Continental, Mesa and Lehman. Pursuant
to its obligations under a registration rights agreement entered into in August
1994, the Company entered into an underwriting agreement in connection with the
transaction containing customary provisions for transactions of such nature and
incurred expenses of approximately $250,000.
John F. Tierney, a director of the Company, is the assistant chief
executive and finance director of GPA Group plc, an Irish aircraft leasing
concern ("GPA"). AWA has entered into various aircraft acquisitions and leasing
arrangements with GPA at terms comparable to those obtained from third parties
for similar transactions. AWA currently leases eight aircraft from GPA; the
rental payments for such leases amounted to $29.5 million for 1996. As of
December 31, 1996, AWA was obligated to pay approximately $500 million under
these leases which expire at various times throughout the year 2013.
In November 1996, the America West Airlines 1996-1 Pass Through Trusts
issued $218.6 million of pass through certificates representing fractional
undivided interests in such trusts. These certificates were issued to refinance
indebtedness incurred by the owner-trustees of eight aircraft and three spare
engines (the "Equipment") which were subleased to AWA. Prior to the issuance of
the certificates, the Equipment was leased to certain United States subsidiaries
of GPA (the "GPA Subs"), which subleased the Equipment to AWA. As a result of
the refinancing, the GPA Subs' interests under leases between the owners of the
Equipment and the GPA Subs were assigned to AWA and the leases were amended and
restated as leases between the owners and AWA, with each GPA Sub being released
from certain of its future obligations thereunder.
Also as a result of the refinancing, GPA, the GPA Subs and AWA entered into
a Put Termination Agreement which terminated arrangements with GPA pursuant to
which GPA could cause AWA to lease up to four additional aircraft prior to June
30, 1999. Pursuant to the Put Termination Agreement, AWA is obligated to make
certain payments to the GPA Subs. For the period from November 26, 1996 to
December 31, 1996, the GPA Subs received $44,000 from AWA. For the year 1997,
the payments due to the GPA Subs under the Put Termination Agreement are
estimated to be $500,000. As compared to the payments AWA was obligated to make
under the prior subleases, the combined payments by AWA (i) under the Put
Termination Agreement to the GPA Subs and (ii) under the restated leases to the
owners of the Equipment, represent net savings to AWA of approximately $8
million over the remaining 15-year term of the leases. For the period from
January 1, 1996, to November 26, 1996, payments from AWA to the GPA Subs under
the subleases relating to the Equipment totaled approximately $30.4 million.
In May 1996, the Company purchased Warrants to purchase 802,860 and
1,384,615 shares of the Company's Class B Common Stock from Continental and GPA,
respectively, for $6,531,266 and $11,609,997, respectively.
In March 1997, AWA purchased Warrants to purchase 1,584,915, 159,580 and
167,028 shares of Class B Common Stock from TPG, TPG Parallel and Air Partners
II, respectively, for $11,062,706, $1,113,868 and $1,165,855, respectively.
William A. Franke, Chairman of the Board and Chief Executive Officer of the
Company, serves as a Director and Chairman of the Board of Airplanes Limited and
the Controlling Trustee and Chairman of Airplanes U.S. Trust. Such entities were
formed to acquire indirectly certain aircraft from GPA, two of which
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are leased indirectly to AWA. In 1997, AWA expects to enter into leasing
arrangements for two additional aircraft from Airplanes U.S. Trust.
The Company has made certain loans to Mr. Franke. If requested to do so,
the Company is required to make certain loans to Mr. Goodmanson. See "Employment
Agreements."
COMPENSATION COMMITTEE INTERLOCKS
In 1996, the members of the Company's Compensation Committee were Ms. Bloch
and Messrs. Kraemer (Chair), Bollenbach, Bradley and Schifter. Mr. Schifter is a
vice president of TPG Advisors, which is the general partner of TPG GenPar, the
general partner of TPG. TPG received Class A Common Stock and Class B Common
Stock and warrants to purchase Class B Common Stock in exchange for its
investment in AWA in connection with the Company's emergence from bankruptcy in
1994. See "Stockholders' Agreement." TPG, Mr. Franke and a third party control
Newbridge America Fund, L.P., an investment fund ("Newbridge"). Mr. Franke and
Mr. Schifter serve as Newbridge's managing partners. Further, Mr. Schifter
serves of counsel to the law firm of Arnold & Porter, where he was a partner
until July 1994. America West from time to time engages Arnold & Porter for
certain legal services, none of which is performed by Mr. Schifter.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports on Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year and reports
on Form 5 and amendments thereto furnished to the Company with respect to its
most recent fiscal year, and written representations from reporting persons that
no Form 5 was required, the Company believes that all filing requirements
applicable to its officers, directors and beneficial owners under Section 16(a)
of the Securities Exchange Act of 1934, as amended, were complied with during
fiscal 1996 except that the Form 3 filed when Michael Carreon was promoted from
his former position with the Company to his current position as Vice President
and Controller inadvertently omitted disclosure of certain options to purchase
shares of Class B Common Stock held by Mr. Carreon at such time. Such
information was included in Mr. Carreon's Annual Statement of Beneficial
Ownership on Form 5.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP were the Company's independent accountants for 1996.
Each of the Audit Committee and the Board of Directors has approved the
selection of KPMG Peat Marwick LLP to audit the Company's financial statements
for 1997. KPMG Peat Marwick LLP will have a representative at the Meeting who
will have the opportunity to make a statement, if the representative desires to
do so, and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
To be considered at the Company's 1998 Annual Meeting of Stockholders, a
stockholder proposal must be received in proper form at the Company's principal
executive office not less than 60 nor more than 90 days prior to the date of
such Annual Meeting and must otherwise comply with the requirements of the
Company's bylaws. To be considered for inclusion in the Company's Proxy
Statement relating to the 1998 Annual Meeting of Stockholders, a stockholder
proposal must be received in proper form at the Company's principal executive
office no later than November 27, 1997, and must otherwise comply with the
requirements of Rule 14a-8 under the Exchange Act.
ANNUAL REPORT AND INFORMATION FOR STOCKHOLDERS
The annual report to stockholders, including financial statements,
accompanies this Proxy Statement but does not constitute a part of the proxy
soliciting materials. THE COMPANY WILL FURNISH A COPY WITHOUT CHARGE OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, INCLUDING
FINANCIAL STATEMENTS BUT WITHOUT EXHIBITS, TO EACH PERSON WHOSE VOTE IS
SOLICITED BY THIS PROXY STATEMENT, UPON WRITTEN REQUEST TO PATRICIA PENWELL,
CORPORATE SECRETARY, AMERICA WEST HOLDINGS CORPORATION, 51 W. THIRD STREET,
TEMPE,
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ARIZONA 85281. Upon request and payment of the Company's reasonable expense of
furnishing the exhibit requested, the Company will furnish any exhibit to the
Form 10-K to any person whose vote is solicited by this Proxy Statement.
OTHER MATTERS
It is not anticipated that there will be presented to the Meeting any
business other than election of directors (Proposal 1) and the amendment of the
Incentive Plan (Proposal 2). If any other matters requiring the vote of the
stockholders arise, including the question of adjourning the meeting and other
matters not known reasonably in advance by the Company, the persons appointed as
proxies in the accompanying proxy will vote on such matters according to their
best judgment.
PROPOSAL 1:
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE NOMINEES FOR THE BOARD OF
DIRECTORS DESCRIBED BELOW. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE IN THEIR PROXIES, SUBJECT TO THE CONDITION THAT IF ANY OF THE NAMED
NOMINEES SHOULD BE UNABLE TO SERVE, DISCRETIONARY AUTHORITY IS RESERVED TO VOTE
FOR A SUBSTITUTE. NOMINEES FOR DIRECTOR WILL BE ELECTED BY PLURALITY OF THE
VOTES CAST AT THE MEETING.
It is proposed that 15 directors be elected, each to hold office for a term
of one year and until his or her successor shall have been properly elected and
shall qualify. Each of the following nominees is a director of the Company at
the present time.
The nominees for directors of Holdings and the nominees for directors of
AWA are identical. A vote for a nominee to the Board of Directors of Holdings
constitutes a vote for such nominee to also serve as a member of the Board of
Directors of AWA.
WILLIAM A. FRANKE -- AGE 59. Chairman of the Board and Chief Executive
Officer of Holdings; Chairman of the Board of AWA -- (Executive Committee). Mr.
Franke was named Chairman of the Board of Directors of AWA in September 1992.
From January 1, 1994 to February 4, 1997, Mr. Franke served as AWA's Chief
Executive Officer and from May 23, 1996 to February 4, 1997 he served as the
AWA's President. In addition to his responsibilities at the Company, Mr. Franke
serves as president of Franke & Company, Inc., a financial services company he
has owned since May 1987. Mr. Franke serves as a director of Phelps Dodge Corp.,
Central Newspapers Inc., the Air Transport Association of America, Beringer Wine
Estates, Inc. and Mtel Latin America, Inc. Mr. Franke serves as a Director and
Chairman of the Board of Airplanes Limited and a controlling trustee and
chairman of Airplanes U.S. Trust, entities involved in aircraft financing and
leasing. Mr. Franke also serves as a managing partner of Newbridge Latin America
L.P., an investment fund controlled by TPG ("Newbridge").
RICHARD R. GOODMANSON -- AGE 49. President and Director of Holdings;
President, Chief Executive Officer and Director of AWA. Mr. Goodmanson joined
the Company in June 1996 and became a member of America West's Board of
Directors effective on October 15, 1996. On February 4, 1997, Mr. Goodmanson was
elected President of Holdings and President and Chief Executive Officer of AWA.
From 1992 until 1996, Mr. Goodmanson served as Senior Vice President of
Operations at Frito-Lay, Inc. From 1980 until 1992, Mr. Goodmanson served as a
principal at the consulting firm of McKinsey and Company, Inc.
JULIA CHANG BLOCH -- AGE 55. (Compensation Committee). Ms. Bloch has been
a member of America West's Board of Directors since August 26, 1994. Ms. Bloch
is currently the president of the United States-Japan Foundation. From June 1993
to June 1996, Ms. Bloch served as the group executive vice president, corporate
relations of Bank of America Corporation. Ms. Bloch served as the U.S.
Ambassador to Nepal from September 1989 through May 1993. Ms. Bloch is a board
member of the American Refugee Committee and the Himalaya Foundation and serves
as a trustee of the Asian Art Museum and the Asia Society.
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STEPHEN F. BOLLENBACH -- AGE 54. (Compensation Committee, Special
Committee). Mr. Bollenbach has been a member of America West's Board of
Directors since August 26, 1994. He has been president and chief executive
officer and a director of Hilton Hotels Corporation since February 1996. He
served as senior executive vice president and chief financial officer of The
Walt Disney Company from May 1995 to February 1996. Prior to May 1995, he was
president and chief executive officer of Host Marriott Corp. He served as
executive vice president and chief financial officer of The Marriott Corporation
from 1992 until 1993. Mr. Bollenbach served as chief financial officer of the
Promus Companies from 1986 to 1990 and served as chief financial officer for the
Trump Organization from 1990 to 1992. Mr. Bollenbach is a nominee for the Board
of Directors of Time Warner, Inc. and serves as a director of Ladbroke Group
plc, Hilton Hotels Corporation and its subsidiaries, American Gaming Association
and Kmart Corporation.
FREDERICK W. BRADLEY, JR. -- AGE 70. (Compensation Committee, Executive
Committee, Special Committee). Mr. Bradley has been a member of America West's
Board of Directors since September 1992. Until his retirement, Mr. Bradley was a
senior vice president of Citibank/Citicorp's Global Airline and Aerospace
business. Mr. Bradley joined Citibank/Citicorp in 1958. In addition, Mr. Bradley
is a member of the board of directors of Banner Aerospace, First Citicorp Life
Insurance Co., Shuttle, Inc. (USAir Shuttle) and the Institute of Air Transport,
Paris, France. Mr. Bradley also is chairman of the board of directors of
Aircraft Lease Portfolio Securitization 92-1 Ltd. and Aircraft Lease Portfolio
Securitization 94-1 Ltd. as well as President of IATA's International Airline
Training Fund of the United States.
JAMES G. COULTER -- AGE 37. (Executive Committee). Mr. Coulter has been a
member of America West's Board of Directors since August 26, 1994. Since 1992,
Mr. Coulter has been a managing director of Texas Pacific Group, an investment
firm. From 1986 to August 1992, Mr. Coulter was vice president of Keystone, Inc.
(formerly Robert M. Bass Group, Inc.), a private investment firm based in Fort
Worth, Texas. From April 1993 until he became a member of the Company's Board,
Mr. Coulter was a member of the board of directors of Continental. Mr. Coulter
also serves as Co-Chairman of the Board of Beringer Wine Estates, Inc. and is a
director of Allied Waste Industries, Inc., Del Monte Holdings, Co. and Virgin
Cinemas, Ltd.
JOHN F. FRASER -- AGE 66. Mr. Fraser has been a member of America West's
Board of Directors since August 26, 1994. Mr. Fraser currently serves as vice
chairman and director of Russel Metals, Inc. (formerly Federal Industries,
Ltd.), and has served in such position since May 1995. Mr. Fraser joined Federal
Industries Ltd. as president and chief executive officer in 1978 and was elected
chairman of the board in 1992. Mr. Fraser is a director and chairman of the
board of Air Canada, and a director of Bank of Montreal, Centra Gas Manitoba
Inc., Coca-Cola Beverages Ltd., Inter-City Products Corporation, Shell Canada
Limited, The Thomson Corporation and Manitoba Telecom Services Inc.
JOHN L. GOOLSBY -- AGE 55. (Audit Committee, Special Committee). Mr.
Goolsby has been a member of America West's Board of Directors since August 26,
1994. He is the president and chief executive officer of The Howard Hughes
Corporation (formerly named Summa Corporation), a subsidiary of The Rouse
Company engaged in the development and management of office and industrial
buildings and large scale land development in Nevada and Southern California. In
addition, Mr. Goolsby serves as a director of Nevada Power Company and Bank of
America Nevada.
RICHARD C. KRAEMER -- AGE 53. (Compensation Committee, Special Committee).
Mr. Kraemer has been a member of America West's Board of Directors since
September 1992. Mr. Kraemer is currently president of Chartwell Capital, Inc., a
private investment company. He served as Chief Executive Officer and President
of UDC Homes, Inc., a Phoenix-based homebuilding company ("UDC"), from October
1994 until March 1996. Mr. Kraemer was President and Chief Operating Officer of
UDC from 1985 until October 1994. He was also director of UDC from 1980 until
March 1996. UDC filed for protection under Chapter 11 of the U.S. Bankruptcy
Code in May 1995. The plan for the reorganization of UDC was confirmed by the
bankruptcy court on October 3, 1995, and consummated on November 14, 1995.
JOHN R. POWER, JR. -- AGE 41. (Executive Committee). Mr. Power has been a
member of America West's Board of Directors since August 26, 1994. He is
president of The Patrician Corporation, an investment company. Prior to joining
The Patrician Corporation, Mr. Power served as senior manager at
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Continental Bank. Mr. Power also serves as a director of NRS Services and a
subsidiary of the J. I. Case Corporation.
LARRY L. RISLEY -- AGE 52. (Audit Committee). Mr. Risley has been a member
of America West's Board of Directors since August 26, 1994. He has been the
chief executive officer and chairman of the board of directors of Mesa since the
founding of the company in 1983. From 1979 to 1982, Mr. Risley was president of
Mesa Aviation Services, Inc.
FRANK B. RYAN -- AGE 60. (Audit Committee). Dr. Ryan has been a member of
America West's Board of Directors since March 17, 1995. Since August 1990, Dr.
Ryan has been a professor of mathematics and of computational and applied
mathematics, and was formerly the vice president of external affairs, of Rice
University. From 1988 to 1990, Dr. Ryan served as president and chief executive
officer of Contex Electronics, Inc., an electronic component manufacturing
company. Dr. Ryan serves as a director of Danielson Holding Corporation, Siena
Holdings, Inc. and Sequoia Systems, Inc. and as a governor advisor to Rice
University.
RICHARD P. SCHIFTER -- AGE 44. (Compensation Committee). Mr. Schifter has
been a member of America West's Board of Directors since August 26, 1994. He has
been a managing director of Texas Pacific Group, an investment firm, since July
1994. Mr. Schifter serves of counsel to the Washington, D.C. based law firm of
Arnold & Porter, where he was an associate from 1979 to 1986 and a partner from
1986 to July 1994. Mr. Schifter serves on the board of directors of TPG
Communications, Ryanair Holdings plc and Mtel Latin America, Inc. and also
serves as a managing partner of Newbridge.
JOHN F. TIERNEY -- AGE 51. Mr. Tierney has served as a member of America
West's Board of Directors since December 1993. Mr. Tierney is the assistant
chief executive and finance director of GPA, and has served GPA in such capacity
since 1993. From 1981 to 1993, he served as chief financial officer of GPA.
RAYMOND S. TROUBH -- AGE 70. (Audit Committee). Mr. Troubh has been a
member of America West's Board of Directors since August 26, 1994. He is a
financial consultant and currently serves on the board of directors of ADT
Limited, ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company, Diamond
Offshore Drilling, Inc., Foundation Health Corporation, General American
Investors Company, The MicroCap Fund, Inc., Olsten Corporation, Petrie Stores
Corporation, Time Warner Inc., Triarc Companies, Inc. and WHX Corporation.
PROPOSAL 2:
AMENDMENT TO AMERICA WEST 1994 INCENTIVE EQUITY PLAN
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND URGES YOU TO VOTE FOR
THE PROPOSED AMENDMENT TO THE INCENTIVE PLAN AS DESCRIBED BELOW. PROXIES WILL BE
SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. PROPOSAL 2 WILL
BE ADOPTED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES
PRESENT IN PERSON OR BY PROXY AT THE MEETING AND ENTITLED TO VOTE.
The Board of Directors recommends the approval of an amendment to the
America West 1994 Incentive Equity Plan (as amended through and in effect on
January 1, 1997, the "Incentive Plan") that would increase the maximum number of
shares available under the Incentive Plan from 3,500,000 to 7,500,000. The
Incentive Plan was adopted by the Board of Directors on December 1, 1994, and
was submitted to and approved by the Company's stockholders at the 1995 Annual
Meeting of Stockholders. The Incentive Plan authorizes the Company to grant
stock options, SARs, performance units, restricted stock, unrestricted stock,
director options, phantom shares and cash tax rights in an amount of up to
3,500,000 shares of Class B Common Stock.
The Company's executive compensation program was developed with the
assistance of an independent nationally-recognized consulting firm. In
determining the appropriate action to be recommended with respect to the
Incentive Plan and this PROPOSAL 2, the Board of Directors considered the advice
of such firm, including information concerning the practices of other major
airlines with respect to stock-based compensation.
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A key component of the Company's executive compensation program consists of
stock-based compensation under the Incentive Plan. As is discussed in the report
of the Compensation Committee included elsewhere in this Proxy Statement, the
Company's strategy with respect to base salaries for key salaried employees is
designed, in part, to reduce the emphasis on fixed compensation by positioning
base salaries below industry levels. Greater emphasis is therefore placed on
stock-based compensation and incentive cash bonuses as a means of attracting,
compensating and retaining key employees. The stock-based compensation is
designed to compensate participants in a way that provides a long-term incentive
for future performance, thus more closely linking the interests of the
participants with the long-term interests of the stockholders of the Company. In
order to continue to utilize the Incentive Plan for stock-based compensation
awards, the number of available shares must be increased above the current limit
of 3,500,000 shares.
The Board of Directors believes that 4,000,000 additional shares are needed
for awards under the Incentive Plan in order for the Company to have the
flexibility to provide appropriate incentive awards to key employees. In
determining the appropriate increase in the number of shares available, the
Board considered a variety of factors, including: (i) the Company's compensation
strategy and philosophy, which stresses performance related and stock-based and
incentive-type compensation over fixed salaries, (ii) that the number of shares
available under the Incentive Plan was exhausted by granting stock options
required to attract and build the Company's new management team that is now
largely in place, (iii) that a significant number of the stock options
previously granted to key employees are subject to stockholder approval of
PROPOSAL 2, (iv) that sufficient additional shares should be made available to
cover grants anticipated to be made over the next several years and (v) that the
percentage of outstanding common shares utilized by the Company for employee and
director compensation under the Incentive Plan is at the low end of the range as
compared to AWA's industry peer group. Consistent with the Company's
compensation strategy, the Company has changed the way it compensates its
directors. This change also requires additional awards under the Incentive Plan.
See "General Information -- Director Compensation."
In evaluating the impact of increasing the available shares under the
Incentive Plan, the Board of Directors also considered that shares covered by
options granted under the Incentive Plan will become issuable over a period of
years due to vesting requirements, and that the increase in number of
outstanding shares attributable to stock based awards under the Incentive Plan
is offset to some extent by the Company's repurchases of its Class B Common
Stock and Warrants pursuant to the Company's repurchase plan. Pursuant to the
repurchase plan the Company is authorized to purchase up to 2.5 million shares
of its Class B Common Stock and all of its originally outstanding 10.4 million
outstanding Warrants. The Company has previously purchased 1.4 million shares of
Class B Common Stock and 4.1 million Warrants pursuant to the plan.
Based on the foregoing, the Board of Directors has adopted, subject to
stockholder approval, a proposal to amend Section 3 of the Incentive Plan to
increase the number of shares in respect of which awards may be made under the
Incentive Plan to 7,500,000. If PROPOSAL 2 is not approved by the Company's
stockholders, the Company could be forced to change its compensation strategy
for both key employees and non-employee directors by increasing cash
compensation to make up for the inability to award stock-based compensation
under the Incentive Plan. Moreover, the failure of PROPOSAL 2 could adversely
affect the ability of the Company to attract and retain high quality employees.
Section 3 of the Incentive Plan currently provides that, subject to
adjustment as described below, the maximum number of shares of Class B Common
Stock available for awards under the Incentive Plan is a total of 3,500,000
shares of Class B Common Stock of which no more than 1,500,000 shares may be
issued as restricted stock or bonus stock. The maximum aggregate number of
shares of Class B Common Stock available for stock options and SARs awarded to
any person during the term of the Incentive Plan is 350,000 shares per year,
subject to adjustment as described below. The maximum number of shares of
restricted stock that may be granted to an employee in a calendar year is
150,000 shares.
The following summary describes briefly the principal features of the
Incentive Plan, and is qualified in its entirety by reference to the full text
of the Incentive Plan, as amended by the proposed Second Amendment, the full
text of which Amendment is provided as Appendix A to this Proxy Statement.
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ELIGIBILITY FOR PARTICIPATION
All officers and employees of the Company or any subsidiary of the Company
and all non-employee directors of the Company will be eligible for participation
in certain Awards under the Incentive Plan. Currently, the Company has
approximately 68 employees and non-employee directors eligible to participate in
the Incentive Plan.
ADMINISTRATION
The Incentive Plan is administered by the Compensation Committee. Under the
terms of the Incentive Plan, the Compensation Committee must consist entirely of
"non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act
and "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Compensation Committee will
select the participants who will receive Awards, determine the type and terms of
Awards to be granted and interpret and administer the Incentive Plan.
AMENDMENT AND TERMINATION
The Board of Directors may terminate or amend the Incentive Plan without
stockholder approval, except that stockholder approval is required for any
amendment that would cause the Incentive Plan to cease to satisfy the
requirements of Rule 16b-3 of the Exchange Act.
TERM OF THE INCENTIVE PLAN
Unless sooner terminated, the Incentive Plan will terminate on November 30,
2004, after which time no additional Awards may be made.
EMPLOYEE STOCK OPTIONS
Stock options granted under the Incentive Plan are subject to the terms and
conditions determined by the Compensation Committee, except that: (i) no stock
options may be granted after the termination of the Incentive Plan; (ii) the
option exercise price cannot be less than the market value per share of Class B
Common Stock at the date of grant; and (iii) no stock option may be exercised
more than 10 years after it is granted. Stock options may be granted as
incentive stock options ("ISOs") under Section 422 of the Code, non-qualified
stock options or a combination thereof.
The Compensation Committee determines the form in which payment of the
exercise price may be made, including cash, shares of Class B Common Stock or
any combination thereof, having a fair market value on the exercise date equal
to the relevant exercise price.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
Each non-employee director automatically receives on the day after each
annual stockholders' meeting an option to purchase 3,000 shares of Class B
Common Stock at an exercise price per share equal to the fair market value of
the Class B Common Stock on the date of grant. Each new non-employee director
will receive an initial option Award to purchase 3,000 shares of Class B Common
Stock on the date of election at an exercise price per share equal to the fair
market value of the Class B Common Stock on the date of grant. Neither the
Compensation Committee nor the Board of Directors has any discretion with
respect to non-employee director stock options. Each such option shall become
exercisable six months from the date of grant and have a term of 10 years
subject to earlier termination depending upon continuity of service on the
Board.
STOCK APPRECIATION RIGHTS
An SAR may be granted in tandem with stock options or separate and apart
from a grant of option rights. The grant price of an SAR shall not be less than
the fair market value per share of Class B Common Stock on the date of grant.
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STOCK GRANTS
The Compensation Committee may also authorize grants of restricted stock.
Restricted stock may not be disposed of by the participant until the
restrictions specified in the Award expire. The participant will have, with
respect to restricted stock, the right to vote the shares and, subject to
limitations (if any) established by the Compensation Committee, receive any cash
dividends. Except as otherwise determined by the Compensation Committee, upon
termination of a participant's employment for any reason during the restriction
period, all restricted stock will be forfeited by the participant. The maximum
number of shares of restricted stock that may be granted to an employee in a
calendar year is 150,000 shares. The Compensation Committee may deliver
unrestricted awards of Class B Common Stock to eligible employees as additional
compensation for the employee's services to the Company.
Subject to certain limitations, each non-employee director automatically
receives on each December 31 while in office (commencing December 31, 1997) that
number of unrestricted shares of Class B Common Stock determined by dividing
$13,000 by the closing market price per share on December 31 of the preceding
year. Neither the Compensation Committee nor the Board of Directors has any
discretion with respect to the non-employee director awards.
PHANTOM SHARES
The Compensation Committee may grant Awards of phantom shares, payable in
cash, shares of Class B Common Stock or a combination thereof, in consideration
of the fulfillment of such conditions as the Compensation Committee may specify.
The maximum number of phantom shares that may be granted to an employee in any
calendar year is 150,000 phantom shares.
PERFORMANCE UNITS
Performance units are units equivalent to $100 (or such other value as the
Compensation Committee determines) and may consist of payments in cash, shares
of Class B Common Stock or a combination thereof, payable upon the achievement
of certain performance goals. The Compensation Committee shall determine the
performance goals to be achieved during any performance period and the length of
any performance period. The maximum amount of compensation that may be subject
to any performance unit grant made to any one employee in a calendar year is
$1.5 million.
CASH TAX RIGHTS
The Compensation Committee may grant cash tax rights in tandem with any
Award payable in shares of Class B Common Stock. A cash tax right is a right to
receive cash upon receipt of the shares of Class B Common Stock pursuant to the
tandem Award.
PERFORMANCE GOALS
The Compensation Committee may, but is not required to, subject any Award
to the attainment of certain performance goals. Such performance goals, which
may be described in terms of Company-wide objectives, in terms of objectives
that are related to performance of the division, department or function within
the Company or a subsidiary in which the employee receiving the Award is
employed or in individual or other terms, and which will relate to a period of
time determined by the Compensation Committee. The performance goals intended to
qualify under Section 162(m) of the Code shall be with respect to one or more of
the following: (i) earnings before interest, taxes, depreciation and
amortization expenses ("EBITDA"); (ii) earnings before interest and taxes
("EBIT"); (iii) EBITDA, EBIT or earnings before taxes and unusual or
nonrecurring items as measured either against the annual budget or as a ratio to
revenue; return on total capital; (iv) total stockholder return; (v) stock price
performance; (vi) average revenue per available seat mile; (vii) average cost
per available seat mile; and (viii) surveys of airline customer satisfaction.
Which objectives to use with respect to an Award, the weighting of the
objectives if more than one is used, and whether the objective is to be measured
against a Company-established budget or target, an index or a peer group of
airlines, shall be determined by the Compensation Committee in its discretion at
the time of grant of
23
<PAGE> 27
the Award. A performance goal need not be based on an increase or a positive
result and may include, for example, maintaining the status quo or limiting
economic losses. With respect to an Award that is subject to performance goals,
the Compensation Committee must first certify that the performance goals have
been achieved before the Award may be paid.
TRANSFERABILITY
No Award under the Incentive Plan that has not become payable or earned is
transferable other than by will or the laws of descent and distribution.
However, the Compensation Committee is authorized to adopt rules and guidelines
whereby Awards could be transferred to family members, trusts and certain other
entities for estate planning purposes.
ADJUSTMENTS
The Compensation Committee may provide for adjustment of Awards under the
Incentive Plan if it determines such adjustment is required to prevent dilution
or enlargement of the rights of participants in the Incentive Plan that would
otherwise result from a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, reorganization or other similar
corporate transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO AWARDS
UNDER THE INCENTIVE PLAN
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Incentive Plan based on federal
income tax laws in effect on January 1, 1997. This summary is not intended to be
exhaustive and does not describe state or local tax consequences. Additional or
different federal income tax consequences to the employee or the Company may
result depending upon other considerations not described below.
TAX CONSEQUENCES TO PARTICIPANTS
Non-qualified Stock Options. In general: (i) no income will be recognized
by an optionee at the time a non-qualified stock option (an option not qualified
under Section 422 of the Code) ("NQO") is granted, (ii) at the time of exercise
of a NQO, ordinary income will be recognized by the optionee in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares if they are nonrestricted on the date of exercise;
and (iii) at the time of sale of shares acquired pursuant to the exercise of a
NQO, any appreciation (or depreciation) in the value of the shares after the
date of exercise will be treated as either short term or long term capital gain
(or loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option ("ISO"),
although the excess of the fair market value on the date of exercise over the
option price is included in alternative minimum taxable income for alternative
minimum tax purposes. If shares of Class B Common Stock are issued to an
optionee pursuant to the exercise of an ISO and no disqualifying disposition of
the shares is made by the optionee within two years after the date of grant or
within one year after the transfer of the shares to the optionee, then, upon the
sale of the shares, any amount realized in excess of the option price will be
taxed to the optionee as long term capital gain and any loss sustained will be a
long term capital loss.
If shares of Class B Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period described above,
the optionee generally will recognize ordinary income in the year of disposition
in an amount equal to any excess of the fair market value of the shares at the
time of exercise (or, if less, the amount realized on the disposition of the
shares in a sale or exchange) over the option price paid for the shares. Any
further gain (or loss) realized by the optionee generally will be taxed as short
term or long term capital gain (or loss) depending on the holding period.
Stock Appreciation Rights. No income will be recognized by a participant
in connection with the grant of an SAR. When the SAR is exercised, the
participant normally will be required to include as taxable
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<PAGE> 28
ordinary income in the year of exercise an amount equal to the amount of any
cash and the fair market value of any nonrestricted shares of Class B Common
Stock received pursuant to the exercise.
Restricted Stock. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the fair market value of the
restricted stock reduced by any amount paid by the recipient at such time as the
shares are no longer subject to a risk of forfeiture or restrictions on transfer
for purposes of Section 83 of the Code. However, a recipient who so elects under
Section 83 (b) of the Code within 30 days of the date of transfer of shares will
have taxable ordinary income on the date of transfer of the shares equal to the
excess of the fair market value of the shares (determined without regard to the
risk of forfeiture or restrictions on transfer) over any purchase price paid for
the shares. If a Section 83(b) election has not been made, any dividends
received with respect to restricted stock that are subject at that time to a
risk of forfeiture or restrictions on transfer generally will be treated as
compensation that is taxable as ordinary income to the recipient.
Unrestricted Stock. The recipient of unrestricted stock generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
shares of Class B Common Stock on the date that such shares are transferred to
the recipient, reduced by any amount paid by the recipient, and the capital gain
or loss holding period for such shares will also commence on that date.
Performance Units. No income generally will be recognized upon the grant
of performance units. Upon payment in respect of earned performance units, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any nonrestricted shares of Class B Common Stock received less
any amount paid for such award at the time of payment or transfer pursuant to
the achievement of the performance goals.
Cash Tax Rights. No income will be recognized upon the grant of a cash tax
right. The recipient of a cash tax right will be subject to tax at ordinary
income rates on the cash received pursuant to the Award.
Special Rules Applicable to Officers and Directors. Where the sale of
stock that is received as the result of a grant of an Award could subject an
officer or director to suit under Section 16(b) of the Exchange Act, the tax
consequences to the officer or director may differ from the tax consequences
described above. In these circumstances, the principal difference usually will
be to postpone the taxation (and valuation) of the stock received so long as the
sale of the stock received could subject the officer or director to suit under
Section 16(b) of the Exchange Act, but not longer than six months.
TAX CONSEQUENCES TO THE COMPANY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction for
federal income tax purposes provided that, among other things, (i) the income
meets the test of reasonableness, is an ordinary and necessary business expense
and is not an "excess parachute payment" within the meaning of Section 280G of
the Code and (ii) the $1 million limitation of Section 162(m) of the Code is not
exceeded.
AMENDED INCENTIVE PLAN BENEFITS
The following tables sets forth, as to (i) each of the Named Executive
Officers, (ii) all current executive officers of the Company as a group, (iii)
all current directors who are not executive officers as a group, and (iv) all
employees, including all current officers who are not executive officers, as a
group, the number of shares covered by awards under the Incentive Plan in 1996.
Other than the automatic annual option grants to non-employee directors
described under "General Information -- Director Compensation" (which are
subject to the limitation of the number of shares of Common Stock available
under the Incentive Plan), it is not possible to determine at this time the
number of shares of Common Stock covered by awards under the Incentive Plan that
may be granted in the future to any executive officer, director, employee, or
group thereof.
25
<PAGE> 29
AMERICA WEST 1994 INCENTIVE EQUITY PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
COVERED BY 1996
NAME POSITION AWARDS (1)(2)
- ------------------------------------ ------------------------------------ ----------------
<S> <C> <C>
William A. Franke................... Chairman and Chief Executive Officer 179,000(3)
of Holdings; Chairman of AWA
Richard R. Goodmanson............... President of Holdings; President and 400,000(4)
Chief Executive Officer of AWA
John R. Garel....................... Senior Vice President-Marketing and 85,000
Sales of AWA
W. Douglas Parker................... Senior Vice President and Chief 85,000
Financial Officer of AWA and
Holdings
Michael A. Vescuso.................. Senior Vice President-Human 85,000
Relations of AWA
EXECUTIVE GROUP (9 persons)............................................... 1,158,000
NON-EXECUTIVE DIRECTOR GROUP
(13 persons)............................................................ 39,000
NON-EXECUTIVE EMPLOYEE GROUP
(59 persons)............................................................ 1,019,000
</TABLE>
- ---------------
(1) For information on options granted in 1996 under the Incentive Plan, see
"Executive Compensation -- Option Grants Table."
(2) Includes 1,041,000 shares covered by stock option grants with a grant date
of October 28, 1996 which are subject to stockholder approval of PROPOSAL 2.
(3) Includes 108,000 shares of restricted stock.
(4) Includes 50,000 shares of restricted stock.
RECENT MARKET VALUE OF COMMON STOCK
On March 31, 1997, the last reported sale price of the Class B Common Stock
on the New York Stock Exchange was $15.625 per share.
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<PAGE> 30
APPENDIX A
SECOND AMENDMENT TO AMERICA WEST
1994 INCENTIVE EQUITY PLAN
WHEREAS, America West Holdings Corporation (the "Company") has heretofore
adopted the America West 1994 Incentive Equity Plan (the "Incentive Plan"); and
WHEREAS, the Incentive Plan has been heretofore amended by a First
Amendment dated as of January 1, 1997;
WHEREAS, the Company desires to further amend the Incentive Plan in order
to increase the maximum number of shares available under the Incentive Plan from
3,500,000 to 7,500,000;
NOW, THEREFORE, Section 3 of the Incentive Plan is hereby amended by
changing the first sentence thereof to read in its entirety as follows:
Subject to adjustments as provided in Paragraph 13, (i) 7,500,000 is the
maximum number of shares of Common Stock which may be issued or transferred
and covered by all outstanding Awards under this Plan, of which number no
more than 1,500,000 shares will be issued or transferred as Restricted
Stock or Bonus Stock and (ii) 350,000 is the maximum number of shares of
Common Stock which may be issued pursuant to or covered by Option Rights
and Appreciation Rights granted under this Plan to any one Participant
during any calendar year.
Notwithstanding the foregoing, this Second Amendment shall not become effective
for any purpose unless and until it is approved by the Company's stockholders.
<PAGE> 31
AMERICA WEST HOLDINGS CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS OF AMERICA WEST HOLDINGS CORPORATION
The undersigned hereby appoints William A. Franke and W. Douglas Parker and
each of them as proxies, with full power of substitution, to vote all shares of
Class A Common Stock and Class B Common Stock of America West Holdings
Corporation that the undersigned is entitled to vote at the Annual Meeting of
Stockholders thereof to be held on May 2, 1997, or at any adjournment or
postponement thereof as set forth on the reverse side of this proxy.
Any executed proxy which does not designate a vote with respect to a
proposal shall be voted in favor of that proposal.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees: William A. Franke, Julia Chang Bloch, Stephen F. Bollenbach,
Frederick W. Bradley, Jr., James G. Coulter, John F. Fraser, Richard R.
Goodmanson, John L. Goolsby, Richard C. Kraemer, John R. Power, Jr., Larry L.
Risley, Frank B. Ryan, Richard P. Schifter, John F. Tierney and Raymond S.
Troubh.
/ / FOR all nominees listed below / / WITHHOLD All
/ / FOR All
Except those whose name(s) appear below.
- ------------------------------------------------------------------------------
PROPOSAL 2: AMENDMENT OF AMERICA WEST 1994 INCENTIVE EQUITY PLAN
/ / FOR / / AGAINST / / ABSTAIN
Please check the following box if you plan to attend the Annual Meeting of
Stockholders in person. / /
<PAGE> 32
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED,
WILL BE VOTED "FOR" PROPOSAL 1 (ALL NOMINEES), "FOR" PROPOSAL 2 AND IN
ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE PROXY WITH RESPECT TO
ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO COMMENCEMENT OF VOTING AT
THE MEETING.
Dated:________________________________, 1997
____________________________________________
SIGNATURE(s)
Please sign exactly as name appears on this card. Joint owners should each
sign. Executors, administrators, trustees, etc., should give their full titles.
PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
FAILURE TO SIGN AND DATE THIS PROXY MAY RESULT IN IT BEING DECLARED INVALID.
