<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
DELTA AIR LINES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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 ActRule 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:
--------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF DELTA AIR LINES]
Delta Air Lines, Inc.
General Offices
Hartsfield Atlanta International
Airport
Post Office Box 20706
Atlanta, Georgia 30320-6001
To Our Stockholders:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the 1996 Annual Meeting of Stockholders of Delta Air Lines, Inc.
As shown in the formal notice which is attached, the meeting will be held in
the Holiday Inn Professional Centre/Atrium, 2001 Louisville Avenue, Monroe,
Louisiana 71201, on Thursday, October 24, 1996, at 9:00 a.m., local time. At
the meeting, in addition to acting on the matters described in the proxy
statement, we will report on the Company's activities during fiscal year 1996.
There will also be an opportunity to discuss matters of interest to you as a
stockholder.
If you will need special assistance at the meeting because of a disability,
please contact Ms. Jeannie Buyers, Coordinator-Investor Relations, Department
829, Delta Air Lines, Inc., P.O. Box 20706, Atlanta, Georgia 30320-6001.
It is important that your shares be represented at the meeting to assure the
presence of a quorum. Please sign, date and promptly mail the enclosed proxy
card in the envelope provided, even if you plan to attend the meeting in
person. Returning your executed proxy card will not affect your right to
attend the meeting and vote your shares in person.
Cordially,
/s/ Ronald W. Allen
----------------------------------
Ronald W. Allen
Chairman of the Board, President and
Chief Executive Officer
Atlanta, Georgia
September 16, 1996
<PAGE>
[LOGO FOR DELTA AIR LINES]
Delta Air Lines, Inc.
General Offices
Hartsfield Atlanta International
Airport
Post Office Box 20706
Atlanta, Georgia 30320-6001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders
of Delta Air Lines, Inc.:
The Annual Meeting of Stockholders of Delta Air Lines, Inc. will be held in
the Holiday Inn Professional Centre/Atrium, 2001 Louisville Avenue, Monroe,
Louisiana 71201, on Thursday, October 24, 1996, at 9:00 a.m., local time, to
consider and vote on:
1. The election of directors for the ensuing year.
2. The ratification of the appointment of Arthur Andersen LLP as
independent auditors for fiscal year 1997.
3. The approval of the material terms of the Incentive Compensation Plan,
as described in the attached proxy statement.
4. The approval of the DeltaShare Stock Option Plan and the Pilots Stock
Option Plan, as described in the attached proxy statement.
5. The stockholder proposal described in the attached proxy statement
relating to political activities, if the proposal is presented at the
meeting.
6. The stockholder proposal described in the attached proxy statement
relating to employment matters, if the proposal is presented at the
meeting.
7. Such other matters as may properly come before the meeting or any
adjournments thereof.
The close of business on August 30, 1996, has been fixed as the record date
for determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. A list of stockholders entitled to
vote at the Annual Meeting will be maintained during the ten-day period
preceding the meeting at the offices of Central Bank, 300 Desiard Street,
Monroe, Louisiana 71201. Your attention is directed to the proxy statement
accompanying this notice.
By Order of the Board of Directors,
/s/ Robert S. Harkey
-----------------------------------
Robert S. Harkey
Senior Vice President - General Counsel
& Secretary
Atlanta, Georgia
September 16, 1996
<PAGE>
DELTA AIR LINES, INC.
GENERAL OFFICES/HARTSFIELD ATLANTA INTERNATIONAL AIRPORT
ATLANTA, GEORGIA 30320
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 24, 1996
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Delta Air Lines, Inc. ("Delta" or the
"Company") to be voted at the Annual Meeting of Stockholders to be held at the
Holiday Inn Professional Centre/Atrium, 2001 Louisville Avenue, Monroe,
Louisiana 71201, on Thursday, October 24, 1996, at 9:00 a.m., local time, or
any adjournments thereof ("Annual Meeting"). The approximate date of mailing
of this proxy statement and the accompanying proxy card is September 16, 1996.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, certain officers and employees of the Company, who will
receive no compensation for their services other than their regular salaries,
may solicit proxies in person or by telephone or other means. The Company may
also make arrangements with brokerage houses, custodians, nominees and other
fiduciaries to send proxy material to their principals at the Company's
expense. The Company has retained Morrow & Co., Inc. to aid in the
solicitation of proxies at a fee of $15,000 plus certain expenses.
VOTING PROCEDURES
VOTING STOCK
The Board of Directors has set August 30, 1996, as the record date for the
determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting. On the record date, there were outstanding 77,045,178 shares
of common stock, par value $3 per share ("Common Stock"), and 6,731,387 shares
of Series B ESOP Convertible Preferred Stock, par value $1 per share ("ESOP
Preferred Stock"). These securities constitute the only classes of securities
entitled to vote at the Annual Meeting.
Each outstanding share of Common Stock and ESOP Preferred Stock entitles the
holder thereof to one vote, subject in the case of the ESOP Preferred Stock to
adjustment in certain circumstances. Holders of the Common Stock and ESOP
Preferred Stock will vote together as a single class on all matters presented
at the Annual Meeting.
The ESOP Preferred Stock is held of record by Fidelity Management Trust
Company, as trustee of the Delta Family-Care Savings Plan ("Savings Plan"),
and may not be sold or distributed outside the Savings Plan except for resale
to the Company. Each share of ESOP Preferred Stock is convertible into 0.8578
shares of Common Stock, subject to adjustment in certain circumstances.
VOTING BY PROXY
If a stockholder is a corporation or partnership, the accompanying proxy
card should be signed in the full corporate or partnership name by a duly
authorized person. If the proxy card is signed pursuant to a power of attorney
or by an executor, administrator, trustee or guardian, the signer's full title
should be given and a certificate or other evidence of appointment should be
furnished. If shares are owned jointly, each joint owner should sign the proxy
card.
<PAGE>
Shares of stock represented by a proxy card that is returned properly signed
will be voted in accordance with the instructions indicated on that proxy
card. If a proxy card is signed and returned without instructions, the shares
will be voted (1) "FOR" the election of the director-nominees listed herein;
(2) "FOR" the ratification of the appointment of Arthur Andersen LLP as
independent auditors for fiscal year 1997; (3) "FOR" the approval of the
material terms of the Incentive Compensation Plan described herein; (4) "FOR"
the approval of the DeltaShare Stock Option Plan and the Pilots Stock Option
Plan described herein; (5) "AGAINST" the stockholder proposal described herein
relating to political activities; and (6) "AGAINST" the stockholder proposal
described herein relating to employment matters.
A proxy given pursuant to this solicitation may be revoked by the
stockholder at any time prior to the voting of the proxy by written notice to
the Corporate Secretary, by delivery of a later-dated proxy, or by attending
the Annual Meeting and voting in person.
If a stockholder wishes to give a proxy to someone other than the persons
designated by the Board of Directors, the three names appearing on the
enclosed proxy card may be crossed out and the name of another person
inserted. The signed proxy card should be presented at the meeting by the
person representing the stockholder. The person named as proxy should have
proof of identification.
QUORUM AND VOTING REQUIREMENTS
A quorum at the Annual Meeting will consist of a majority of the votes
entitled to be cast by the holders of all shares of Common Stock and ESOP
Preferred Stock that are outstanding and entitled to vote.
A majority of the votes entitled to be cast by the holders of all shares of
Common Stock and ESOP Preferred Stock, voting together as a single class, that
are present, or represented, at the meeting and entitled to vote will be
necessary (1) to elect the director-nominees listed herein; (2) to ratify the
appointment of Arthur Andersen LLP as independent auditors; (3) to approve the
material terms of the Incentive Compensation Plan described herein; (4) to
approve the DeltaShare Stock Option Plan and the Pilots Stock Option Plan
described herein, provided that the total votes cast on such proposal
represent over 50% in interest of all securities entitled to vote on such
proposal; (5) to approve the stockholder proposal described herein relating to
political activities; and (6) to approve the stockholder proposal described
herein relating to employment matters. Votes "withheld" from director-
nominees, as well as abstentions on these proposals, will have the same effect
as negative votes. Broker non-votes on these matters will not be included in
calculating the number of votes necessary for approval.
GENERAL INFORMATION
BOARD OF DIRECTORS
The Board of Directors has responsibility for establishing broad corporate
policies and for the overall performance of the Company, although it is not
involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business by various reports and documents given to
them on a regular basis, as well as by operating, financial and other reports
made at meetings of the Board of Directors and its Committees. Regular
meetings of the Board of Directors are held four times per year and special
meetings are scheduled when required. The Board held four regular meetings and
eight special meetings in fiscal 1996.
COMMITTEES ESTABLISHED BY THE BOARD
The Committees established by the Board of Directors to assist it in the
discharge of its responsibilities are described below. The biographical
information concerning the directors, set forth elsewhere in this proxy
statement, identifies the Committee memberships held by each director.
2
<PAGE>
The Administrative Committee acts as the fiduciary for the administration
and operation of certain of the Company's benefit plans. The Committee, which
consists of eight officers of the Company (none of whom is a member of the
Board of Directors), met four times in fiscal 1996. Each Committee member has
an alternate who may attend meetings and vote in his absence.
The Audit Committee reviews the scope and results of the internal and
external annual audits, the major non-audit services provided to the Company
by the independent auditors, and the adequacy of the Company's system of
internal controls. It also recommends to the Board the engagement of
independent auditors for the Company. The Committee, which consists of five
non-employee directors, met twice in fiscal 1996.
The Benefit Funds Investment Committee acts as the fiduciary for managing
the investment policies and assets of certain of the Company's benefit plans.
The Committee, which consists of five non-employee directors, met four times
in fiscal 1996.
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings. The Committee, which consists of the Chairman of the
Board and four non-employee directors, did not meet in fiscal 1996.
The Finance Committee reviews the Company's financial planning and financial
structure, funds requirements, and borrowing and dividend policies. The
Committee, which consists of five non-employee directors, met four times in
fiscal 1996.
The Personnel, Compensation & Nominating Committee makes recommendations to
the Board concerning the election of the Company's officers, the compensation
for the Chief Executive Officer and the overall policy of the Company's
benefit plans for non-contract personnel. It also sets the salaries for all
officers above the level of Vice President except the Chief Executive Officer,
and administers the Incentive Compensation and 1989 Stock Incentive Plans. The
Committee, which consists of four non-employee directors, met five times in
fiscal 1996.
The Personnel, Compensation & Nominating Committee also recommends to the
Board candidates for election as directors, and will consider nominees
recommended by stockholders. Such recommendations should be submitted in
writing to the Corporate Secretary of the Company with a description of the
proposed nominee's qualifications and other relevant biographical information,
and the nominee's consent to serve as a director.
COMPENSATION OF DIRECTORS
Compensation for non-employee members of the Board of Directors (i.e.,
directors who are not employed by the Company on a full-time basis) has been
set at an annual retainer of $25,000 and a meeting fee of $1,000 plus expenses
for each Board and Committee meeting attended. In addition, an annual fee of
$7,500 has been established for the Chairpersons of the Audit, Benefit Funds
Investment, Finance and Personnel, Compensation & Nominating Committees. In
order to emphasize the need for cost reductions, the Board of Directors,
effective January 1, 1993, reduced by 20% the foregoing annual retainer,
meeting fees and Committee Chairperson fees. The reduced fees remain in
effect.
Full-time employees of the Company who serve as directors receive only
reimbursement of expenses incurred in attending meetings. Directors and their
spouses are eligible for complimentary transportation privileges on Delta.
Directors may elect to defer all or any part of their compensation earned as a
director until a date specified by the director (which date shall be at least
one year, but no more than ten years,
3
<PAGE>
following the end of the calendar year in which the compensation was earned).
A participating director may choose, on a prospective basis, an investment
return on the deferred amount from among the 17 investment return choices
available under the Delta Family-Care Savings Plan (including the Delta Common
Stock Fund). In addition, the Company will continue to pay interest on amounts
deferred prior to October 26, 1995, based on the prime rate in effect at three
specified banks. Non-employee directors may also elect to receive all or a
portion of their fees for services as a member of the Board in shares of
Common Stock at current market prices.
Directors who retire from the Board may be elected advisory directors for a
term which varies depending upon the director's term of service and age at
retirement. Advisory directors receive an annual retainer equal to the annual
retainer paid to non-employee directors at the time of their retirement,
without regard to the annual retainer reduction discussed above.
CHARITABLE AWARD PROGRAM
The Company's charitable contribution program permits each director to
recommend up to five tax-exempt organizations to receive donations totaling $1
million after the director's death. Recommended donations will be made by The
Delta Air Lines Foundation, a tax-exempt charitable foundation funded by the
Company. On July 28, 1994, the Board discontinued this program for all future
directors who were not members of the Board on that date.
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of twelve directors is to be elected at the Annual Meeting, each
director so elected to hold office for a term of one year and until the
election and qualification of a successor. In the event any nominee for
director declines or is unable to serve, a substitute nominee or nominees may
be chosen by the persons authorized by the Board of Directors to vote the
proxies. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
NOMINEES:
Ronald W. Allen, Edwin L. Artzt, Henry A. Biedenharn, III, James L.
Broadhead, Edward H. Budd, George D. Busbee, R. Eugene Cartledge, Mary
Johnston Evans, Gerald Grinstein, Jesse Hill, Jr.,Peter D. Sutherland and
Andrew J. Young.
All of the nominees were elected by the stockholders at the last Annual
Meeting.
During fiscal 1996, each nominee attended at least 75% of the meetings of
the Board of Directors and the Committees on which he or she served.
One of the current directors, Mr. Allen, is a full-time employee of the
Company. The predominantly non-employee Board brings to the Company a wide and
valuable range of judgment and experience from such diverse fields as air and
ground transportation, consumer goods, government and international affairs,
insurance, international trade, law, utilities, and paper and paperboard
production.
4
<PAGE>
Certain information about the nominees follows:
RONALD W. ALLEN has been Chairman of the Board and Chief Executive Officer
of Delta since August 1, 1987. On March 1, 1993, Mr. Allen was elected to the
additional office of President, a position he also held from August 9, 1990 to
April 30, 1991. He was President and Chief Operating Officer of the Company
from 1983 to July 31, 1987. Mr. Allen has been a director of Delta since 1975,
and is Chairman of the Executive Committee. He is also a director of The Coca-
Cola Company and NationsBank Corporation, and a member of The Business
Council, The Business Roundtable, the Board of Directors of the U.S. Chamber
of Commerce and the Board of Trustees of Presbyterian College. Age 54.
EDWIN L. ARTZT was Chairman of the Board and Chief Executive Officer of The
Procter & Gamble Company from January 1990 until his retirement in July 1995,
when he became Chairman of the Executive Committee of the Board of Directors
of The Procter & Gamble Company. From June 1984 to January 1990, Mr. Artzt
served as Vice Chairman of The Procter & Gamble Company and as President of
Procter & Gamble International. He has been a director of Delta since 1991,
and is a member of the Benefit Funds Investment Committee and the Finance
Committee. Mr. Artzt is also a director of American Express Company, Barilla
S.p.A. (Italy), GTE Corporation and Teradyne, Inc., and a member of The
Business Council. Age 66.
HENRY A. BIEDENHARN, III was President, Chief Executive Officer and a
director of Ouachita Coca-Cola Bottling Company, Inc., and four other Coca-
Cola bottling companies located in Arkansas, Louisiana and Mississippi, from
1981 until his retirement in February 1996. He also served as Chairman of the
Board of Ouachita Coca-Cola Bottling Company, Inc. from 1991 to February 1996.
He has been a director of Delta since 1986, and is a member of the Audit
Committee and the Benefit Funds Investment Committee. Mr. Biedenharn is a
director of Hudson, Inc. and Biedco Corporation. Age 54.
JAMES L. BROADHEAD has been Chairman of the Board and Chief Executive
Officer of FPL Group, Inc., and its principal subsidiary, Florida Power &
Light Company, since May 1990. From January 1989 to May 1990, he was President
and Chief Executive Officer of FPL Group, Inc. From 1986 to October 1988,
Mr. Broadhead served as President, Telephone Operating Group of GTE
Corporation. He has been a director of Delta since 1991, and is a member of
the Audit Committee and the Personnel, Compensation & Nominating Committee.
Mr. Broadhead is also a director of Barnett Banks, Inc. and The Pittston
Company, and a member of The Business Council and The Business Roundtable. Age
60.
EDWARD H. BUDD has been Chairman of the Executive Committee of the Board of
Directors of The Travelers Group, Inc. since December 31, 1993. He was
Chairman of the Board and Chief Executive Officer of The Travelers Corporation
from 1982 until his retirement in 1993, and was an executive officer of that
company from 1974 through 1993. He has been a director of Delta since 1985, is
Chairman of the Benefit Funds Investment Committee, and is a member of the
Executive Committee and the Finance Committee. Mr. Budd is also a director of
GTE Corporation, a member of the American Academy of Actuaries and The
Business Council, and a Trustee of Tufts University. Age 63.
GEORGE D. BUSBEE has been of counsel to the law firm of King & Spalding
since 1993, was a partner in that firm from 1983 to 1993, and was Governor of
the State of Georgia from 1975 until 1983. Prior to his election as Governor,
he served for 18 years as a member of the Georgia House of Representatives,
while also engaging in the practice of law. Mr. Busbee has been a director of
Delta since 1983, and is a member of the Finance Committee. He is also a
director of Union Camp Corporation and Weeks Corporation. Age 69.
5
<PAGE>
R. EUGENE CARTLEDGE has been Chairman of the Board of Savannah Foods &
Industries, Inc. since April 1996. He was Chairman of the Board and Chief
Executive Officer of Union Camp Corporation from January 1986 until his
retirement in June 1994. Mr. Cartledge has been a director of Delta since
1990, is Chairman of the Finance Committee, and is a member of the Executive
Committee and the Personnel, Compensation & Nominating Committee. He is also a
director of Blount, Inc., Chase Brass Industries, Inc., Sun Company, Inc.,
UCAR International Inc. and Union Camp Corporation. Age 67.
MARY JOHNSTON EVANS is a director of Baxter International Inc., Dun &
Bradstreet Corp., Household International, Inc., New Europe Fund and Sun
Company, Inc. She has been a director of Delta since 1982, and is a member of
the Audit Committee and the Personnel, Compensation & Nominating Committee.
Mrs. Evans is also a senior member of the Conference Board, a member of the
Advisory Board of Morgan Stanley, Inc. and a member of the Nominating
Committee of the New York Stock Exchange, Inc. She was a director of AMTRAK
from 1974 to 1980, serving as Vice Chairman from 1974 until 1979. Age 66.
GERALD GRINSTEIN was Chairman of Burlington Northern Santa Fe Corporation
(successor to Burlington Northern Inc.) from September 1995 until his
retirement in December 1995. He was Chairman and Chief Executive Officer of
Burlington Northern Inc. and Burlington Northern Railroad Company from July
1991 until consummation of the merger of Burlington Northern Inc. and Santa Fe
Corporation in September 1995. Mr. Grinstein was Chairman, President and Chief
Executive Officer of Burlington Northern Inc. from October 1990 to July 1991,
and President and Chief Executive Officer of that company from January 1989 to
October 1990. From May 1989 to July 1991, Mr. Grinstein also served as
Chairman, President and Chief Executive Officer, and from February 1989 to May
1989, President and Chief Executive Officer, of Burlington Northern Railroad
Company. Mr. Grinstein was Vice Chairman of Burlington Resources Inc. from May
1988 to December 1988; Vice Chairman of Burlington Northern Inc. from April
1987 to December 1988; and Chief Executive Officer of Western Air Lines, Inc.
from 1985 through March 1987. He has been a director of Delta since 1987, is
Chairman of the Personnel, Compensation & Nominating Committee, and is a
member of the Executive Committee and the Finance Committee. He is also a
director of Browning-Ferris Industries, Inc., Sundstrand Corporation and
Transport Holdings Inc. Age 64.
JESSE HILL, JR. was Chairman of the Board of Atlanta Life Insurance Company
from 1993 until his retirement in July, 1995. He was Chairman and Chief
Executive Officer of that company from 1992 to 1993, Chairman, President and
Chief Executive Officer from 1991 to 1992, and President and Chief Executive
Officer from 1973 to 1991. He has been a director of Delta since 1975, is
Chairman of the Audit Committee and is a member of the Benefit Funds
Investment Committee and the Executive Committee. He is also a director of
Knight-Ridder Newspapers, Inc., National Service Industries, Inc., SunTrust
Banks, Inc. and SunTrust Bank, Atlanta. Age 70.
PETER D. SUTHERLAND has been Chairman and Managing Director of Goldman Sachs
International since September 1, 1995, and a general partner of The Goldman
Sachs Group, L.P. and Goldman, Sachs & Co. since November 25, 1995. Mr.
Sutherland served as Director-General of the General Agreement on Tariffs and
Trade from July 1, 1993 to May 1, 1995, and as Director-General of the World
Trade Organization from January 1, 1995 to May 1, 1995. He was Chairman of the
Board of Allied Irish Banks plc from 1989 to 1993. He served as a Commissioner
of the European Communities from 1984 to 1989. He was a director of Delta from
April 23, 1992 until July 1, 1993, and was re-elected by the Board effective
September 1, 1995, following the conclusion of his service to the General
Agreement on Tariffs and Trade and the World Trade Organization. Mr.
Sutherland is a member of the Audit Committee. Mr. Sutherland is a Non-
executive Director and Deputy Chairman of The British Petroleum Company plc;
and a director of ABB Asea Brown Boveri Ltd., Allied Irish Banks plc, Investor
6
<PAGE>
AB (Sweden), LM Ericsson Holdings Ltd. and Telefonaktiebolaget LM Ericsson
(LME). Mr. Sutherland is also a member of the Action Committee for Europe and
the European Community -- America Trust. Age 50.
ANDREW J. YOUNG has been Vice Chairman of Law Companies Group, Inc. since
1993, and a director of that company since August 1995. He was Chairman of Law
Companies International Group, Inc. (a former subsidiary of Law Companies
Group, Inc.) from 1990 to 1993. Mr. Young was Mayor of the City of Atlanta,
Georgia from 1982 to 1990, United States Ambassador to the United Nations from
1977 to 1979, and a member of the House of Representatives of the United
States Congress from 1973 to 1977. He has been a director of Delta since 1994,
and is a member of the Benefit Funds Investment Committee. Mr. Young is a
director of Atlanta Life Insurance Company, Cox Communications, Inc., Film
Fabricators, Inc., Host Marriott Corporation and Thomas Nelson, Inc., a member
of the Board of Trustees of Howard University and the Georgia Tech Advisory
Board, and a director of the Martin Luther King, Jr. Center, the Global
Infrastructure Fund and the Center for Global Partnership. He is also Co-
Chairman of the Atlanta Committee for the Olympic Games and a member of the
Board of the United States Olympic Committee. Mr. Young is also serving as the
1996 Chairman of the Greater Atlanta Chamber of Commerce. Age 64.
7
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock and, if
applicable, ESOP Preferred Stock beneficially owned as of August 30, 1996, by
each director of the Company, each executive officer named in the Summary
Compensation Table in this proxy statement, and all directors and executive
officers of the Company as a group. Unless otherwise indicated by footnote,
the owner exercises sole voting and investment power over the shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF CLASS ON
NAME OF BENEFICIAL OWNER TITLE OF SECURITIES OWNED AUGUST 30, 1996(1)
- ------------------------ -------------------- ------------ -------------------
<S> <C> <C> <C>
DIRECTORS
Ronald W. Allen......... Common Stock 394,778(2)
ESOP Preferred Stock 89
Edwin L. Artzt.......... Common Stock 1,000
Henry A. Biedenharn,
III.................... Common Stock 20,621(3)
James L. Broadhead...... Common Stock 1,000
Edward H. Budd.......... Common Stock 2,505(4)
George D. Busbee........ Common Stock 100
R. Eugene Cartledge..... Common Stock 1,096
Mary Johnston Evans..... Common Stock 1,191(4)
Gerald Grinstein........ Common Stock 1,878
Jesse Hill, Jr.......... Common Stock 1,470(5)
Peter D. Sutherland..... Common Stock 200(6)
Andrew J. Young......... Common Stock 100
EXECUTIVE OFFICERS
Harold C. Alger......... Common Stock 21,992(2),(7)
ESOP Preferred Stock 115
Robert W. Coggin........ Common Stock 38,025(2)
ESOP Preferred Stock 111
Maurice W. Worth........ Common Stock 15,973
ESOP Preferred Stock 110
Thomas J. Roeck, Jr..... Common Stock 123,684(2)
ESOP Preferred Stock 126
Directors and Executive
Officers as a Group
(20 Persons)........... Common Stock 751,930(2),(8) 1.0%
ESOP Preferred Stock 759
</TABLE>
- --------
(1) Percentage is shown only if equal to or greater than 1% of the class.
(2) Includes the following number of shares of Common Stock which the
following persons or group have the right to acquire within 60 days upon
the exercise of stock options: Mr. Allen--363,000; Mr. Alger--5,000; Mr.
Coggin--25,500; Mr. Roeck--116,300; and directors and executive officers
as a group--613,500.
(3) Includes 12,856 shares of Common Stock owned by the Emma Lou Biedenharn
Foundation, of which Mr. Biedenharn is a director and trustee; and 7,524
shares of Common Stock owned by Hudson, Inc., over which Mr. Biedenharn
has shared voting and investment power.
(4) Includes 386 shares and 191 shares of Common Stock attributable to Mr.
Budd and Mrs. Evans, respectively, due to their selection of the Delta
Common Stock Fund investment return choice under the Directors' Deferred
Compensation Plan, described on pages 3-4 of this proxy statement.
8
<PAGE>
(5) Excludes 400 shares of Common Stock held by Mr. Hill's spouse as custodian
for their minor grandchildren. Mr. Hill disclaims beneficial ownership of
these shares.
(6) Excludes 279,055 shares of Common Stock beneficially owned by Goldman,
Sachs & Co. Mr. Sutherland disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein.
(7) Excludes 12 shares of Common Stock and 21 shares of ESOP Preferred Stock
beneficially owned by Mr. Alger's spouse. Mr. Alger disclaims beneficial
ownership of these shares.
(8) Excludes 412 shares of Common Stock and 21 shares of ESOP Preferred Stock
beneficially owned by family members of directors and executive officers
as to which shares they disclaim beneficial ownership, as well as the
shares of Common Stock described in Note (6).
BENEFICIAL OWNERS OF MORE THAN 5% OF VOTING STOCK
The following table sets forth the holdings of the only persons known to the
Company to beneficially own more than five percent of any class of the
Company's voting securities.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL CLASS ON
OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP AUGUST 30, 1996
------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Sanford C. Bernstein &
Co., Inc. Common Stock 4,687,034(1) 6.1%
One State Street Plaza
New York, NY 10004
The Capital Group
Companies, Inc. Common Stock 3,901,290(2) 5.1%
333 South Hope Street
Los Angeles, CA 90071
Fidelity Management
Trust Company ESOP Preferred Stock 6,731,387(3) 100.0%
82 Devonshire Street Common Stock 3,539,215(3) 4.6%
Boston, MA 02109
</TABLE>
- --------
(1) Based on a Schedule 13G dated February 7, 1996, in which Sanford C.
Bernstein & Co., Inc. reported that, as of December 31, 1995, it had sole
voting power over 2,434,460 of such shares, shared voting power over
554,988 of such shares, and sole dispositive power over all 4,687,034 of
such shares.
(2) Based on a Schedule 13G dated February 9, 1996, in which The Capital Group
Companies, Inc. reported that, as of December 29, 1995, it had sole voting
power over 1,122,630 of such shares, shared voting power over none of such
shares, and sole dispositive power over all 3,901,290 of such shares. The
Capital Group Companies, Inc. disclaims beneficial ownership of all of
such shares.
(3) These shares are held by Fidelity Management Trust Company as the trustee
of the Savings Plan.
9
<PAGE>
THE DELTA FAMILY-CARE SAVINGS PLAN
Fidelity Management Trust Company is the trustee of the Savings Plan, a
qualified defined contribution pension plan under which eligible Delta
personnel may contribute a portion of their earnings on a pre-tax or after-tax
basis to various investment funds, including a fund invested primarily in
Common Stock ("Delta Common Stock Fund").
Subject to certain federal tax limitations, during fiscal 1996, Delta
contributed 50c to a participant's account for every $1 contributed by that
participant, up to 2% of the participant's annual earnings. The Savings Plan
contains an employee stock ownership plan ("ESOP") feature pursuant to which a
specified amount of the Company's contributions to a participant's account
during each Savings Plan year is invested in ESOP Preferred Stock and Common
Stock ("Preferred Stock Fund"). At June 30, 1996, there were approximately
57,300 participants in the Savings Plan.
The Savings Plan provides that shares of ESOP Preferred Stock and Common
Stock allocated to a participant's account in the Preferred Stock Fund
("Allocated Shares") will be voted by the trustee in accordance with the
participant's confidential voting instructions or, if no voting instructions
are received by the trustee, such shares will be voted by the trustee in its
discretion. The Savings Plan further provides that shares of ESOP Preferred
Stock not yet allocated to any participant's account will be voted by the
trustee in proportion to the votes cast with respect to Allocated Shares for
which voting instructions are received.
The Savings Plan provides that shares of Common Stock attributable to a
participant's account in the Delta Common Stock Fund will be voted by the
trustee in accordance with the participant's confidential voting instructions
or, if no instructions are received by the trustee, such shares will be voted
by the trustee in its discretion.
CERTAIN OTHER BENEFICIAL OWNERS
In fiscal 1990, the Company entered into separate equity cross-purchase
agreements with Singapore Airlines Limited ("Singapore Airlines") and
Swissair, Swiss Air Transport Company Ltd. ("Swissair"). Pursuant to these
agreements, the Company sold 2.5 million shares of Common Stock to each of
Singapore Airlines and Swissair, and purchased an equity interest in both of
these airlines.
In their equity cross-purchase agreements with Delta, Singapore Airlines and
Swissair have agreed to vote their shares of the Company's voting stock in
proportion to the votes cast by the Company's other stockholders or, at
Singapore Airlines' or Swissair's election, as recommended by the Company's
Board of Directors, until (1) in the case of Singapore Airlines, the earlier
of October 25, 1999 or such time as Singapore Airlines ceases to own 2% or
more of the Company's outstanding voting power, or (2) in the case of
Swissair, July 9, 1999. Singapore Airlines and Swissair have also agreed to
certain restrictions on their right to transfer their shares of Common Stock,
to acquire additional shares of the Company's voting stock and to seek to
affect or influence the control of the Company's management, Board of
Directors or business. The Company has agreed to similar voting and other
restrictions with respect to its ownership of the voting stock of Singapore
Airlines and Swissair.
10
<PAGE>
OTHER MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel, Compensation & Nominating Committee are Mr.
Grinstein, who serves as Chairman, Mr. Broadhead, Mr. Cartledge and Mrs.
Evans.
Mr. Grinstein was an executive officer of Western Air Lines, Inc.
("Western") from 1985 through March 1987. Western became a wholly owned
subsidiary of the Company on December 18, 1986, and was merged into Delta on
April 1, 1987.
EMPLOYMENT AGREEMENT
In 1987, the Company, with the approval of the Board of Directors, entered
into a contract with Mr. Allen under which he agreed to continue to serve as a
senior executive officer of Delta for a term beginning August 1, 1987 and
ending on the earlier of July 31, 1997, or the first day of the month
following his retirement under the Company's retirement plan.
Effective August 15, 1992, Mr. Allen's annual base salary was reduced at his
request from $575,000 to $475,000. As discussed on page 15 of this proxy
statement, Mr. Allen's annual base salary was restored to $575,000 on August
16, 1996.
This contract further provides for Mr. Allen's employment by the Company as
a part-time advisor and consultant for ten years beginning on the earliest of
the first day of the month following the date to which the Board of Directors
determines that his normal termination date under his contract should be
advanced and the part-time advisor and consultant period should begin, his
retirement date, or the first day of the month following his complete
disability. Compensation during the advisory and consulting period is fixed at
a monthly rate of one-third of the greater of Mr. Allen's (1) monthly rate of
pay immediately prior to his undertaking the advisory and consulting services,
or (2) average monthly rate of pay determined from the highest sum of his
monthly rate of pay during any sixty consecutive months during his last ten
years of continuous employment prior to termination of employment. The monthly
consulting fee plus Mr. Allen's actual monthly retirement pay effective as of
the date of retirement may not exceed 90% of the greater of the monthly rate
of pay calculated in (1) or (2) above. All calculations are without regard to
Mr. Allen's voluntary salary reduction.
The contract also states that, if Mr. Allen dies after the beginning but
before the end of the consulting period, 100% of the remaining consulting fees
with respect to such period will be paid to his estate, or as he may otherwise
specify, at such periods as the Company may determine, but not less often than
monthly. If Mr. Allen dies before the beginning of the consulting period, 50%,
60%, or 70% of the consulting fee will be paid, depending on whether he dies
with no or one, two, or three or more, respectively, eligible survivors.
CERTAIN LEGAL PROCEEDINGS
In February 1995, Delta changed its travel agency commission program by
implementing certain maximum commission payments for the sale of domestic
airline tickets. Travel agents filed class action antitrust litigation against
Delta and several other airlines that initiated travel agent commission cap
programs. The travel agents alleged that the defendant airlines conspired to
reduce the commissions paid to travel agents in violation of the federal
antitrust laws, and sought damages of approximately $725 million, to be
trebled under the antitrust laws. On September 5, 1996, Delta and the
plaintiffs entered into an agreement to settle this litigation. Under the
terms of the settlement, which is subject to the approval of the United States
District Court in Minneapolis, Delta agreed to pay the plaintiffs $20 million.
Delta believes this lawsuit is without merit, but settled this litigation to
avoid the uncertainty, expense and diversion of management time associated
with a lengthy trial. American Express Company, of which Mr. Artzt is a
director, is a plaintiff in this action. The Company instituted procedures to
exclude Mr. Artzt from participation in matters related to this litigation.
11
<PAGE>
LEGAL AND INVESTMENT BANKING SERVICES
Mr. Busbee is of counsel to the law firm of King & Spalding, which provided
certain legal services to the Company in fiscal 1996 and is expected to
provide similar services in fiscal 1997.
Mr. Sutherland is a general partner of Goldman, Sachs & Co., which provided
certain investment banking services to the Company in fiscal 1996 and is
expected to provide similar services in fiscal 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Delta's
directors, executive officers and persons who beneficially own more than 10%
of a registered class of the Company's equity securities ("Reporting Persons")
to file certain reports concerning their beneficial ownership of Delta's
equity securities. Delta believes that during fiscal 1996 all Reporting
Persons complied with their Section 16(a) filing obligations, except that Form
4 reports filed on behalf of Mr. Sutherland for November 1995, and January and
February 1996 were filed after their respective due dates. Those reports
reflect 59 transactions effected by Goldman, Sachs & Co., an investment
banking firm in which Mr. Sutherland became a general partner on November 25,
1995. Because of Mr. Sutherland's status as a general partner, trading by
Goldman, Sachs & Co. in Delta's equity securities may be attributable to Mr.
Sutherland.
PERSONNEL, COMPENSATION & NOMINATING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report of the Personnel, Compensation & Nominating Committee (the
"Committee") of the Board of Directors describes the Committee's executive
compensation policies. It also describes the bases on which the Committee made
fiscal 1996 compensation determinations with respect to the Chief Executive
Officer of the Company.
As is noted earlier in this proxy statement, the Committee's duties include
recommending to the Board the base salary for the Chief Executive Officer,
setting the base salaries for all other officers above the level of Vice
President, and administering the Company's Incentive Compensation Plan and
1989 Stock Incentive Plan. The Committee also evaluates executive performance
and addresses other matters related to executive compensation.
COMPENSATION POLICY AND OVERALL OBJECTIVES
The Committee's foremost objective for Delta's executive compensation
program is to support the Company's business strategy and goals by developing
and motivating a group of highly talented executives to work for the long-term
advantage of the Company and its primary stakeholder groups--Delta
stockholders, Delta customers and Delta people. To achieve this objective, the
Committee believes the amount and components of the executive compensation
package should enable the Company to attract and retain talented executives,
reward outstanding performance and more closely link the interests of the
Company's executives and these stakeholders. In determining actual
compensation levels, the Committee considers all elements of the executive
compensation program in total, rather than any one element in isolation. The
Committee has selected and retained a professional compensation consulting
firm to assist it in evaluating the Company's executive compensation package.
12
<PAGE>
To enhance the Company's ability to meet the objectives listed above, the
Committee believes it is important to consider pay levels and practices at
companies with which Delta competes for executives. The results of these
market comparisons, and their impact on the program design and pay
opportunities for Delta's executive officers, are discussed in more detail
below. The Committee believes that the Company's future success depends
heavily on attracting and retaining the most qualified personnel throughout
the Company and that to do so it must provide an opportunity for all personnel
to achieve market-based pay, key components of which include competitive
salaries and performance-based incentive compensation.
The primary components of the Company's executive compensation package are
base salary, incentive compensation and stock-based awards.
DISCUSSION OF PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
Base Salary
When reviewing each executive officer's salary, the Committee considers the
executive's performance, responsibilities, experience and expertise, salaries
for comparable positions at other companies (as discussed further below), and
equity issues relating to pay of other Company executives. In making salary
recommendations or decisions, the Committee exercises its discretion and
judgment based on these factors. No specific formula is applied to determine
the weight of any factor.
The Committee believes the competitive "market" with respect to its
executive officer salary determinations includes transportation and aerospace
companies, service companies of a similar size to the Company, and other
companies with headquarters in the Atlanta area. In making salary
determinations, the Committee also reviews compensation for executive officers
at a smaller group of companies comprised only of certain other large domestic
airlines.* The Committee considers pay at both groups of companies in making
its decisions because it believes that the market for the Company's
executives, and thus the relevant competitive data, includes a broader group
of companies than the airline group alone. It is the Committee's goal to
target base salaries at the 50th percentile level of a combination of these
two market groups.
During fiscal 1996, the Committee increased salary rates for selected
executive officers (excluding the Chief Executive Officer, whose pay is
discussed below) who were assigned increased responsibilities during the year,
but the salary rates for executive officers generally remain below the 50th
percentile level of a combination of the two market groups discussed above.
The Committee believes the performance of the Company's executive officers
dictates that salaries be increased to the targeted levels to ensure the
retention of high performing officers.
Incentive Compensation Plan
Consistent with the overall objectives described above, the Incentive
Compensation Plan provides an opportunity for participants to receive an
annual cash award based upon the achievement of corporate, individual and team
goals. It enhances the link between pay and performance by tying payments to
the achievement of specific, predetermined goals, and motivates participants
by clearly communicating the potential rewards for achieving those goals. It
also gives the Committee flexibility to change the goals from year to year to
reflect
- --------
* This large domestic airline group differs from the group represented in the
Standard & Poor's Airline Index referred to on page 21.
13
<PAGE>
different areas of emphasis. The Plan thus is similar to plans in effect at
virtually all of the companies in both market groups discussed above. The
Committee believes the Plan strongly reinforces the performance orientation of
the Company's executive compensation philosophy and that it is a critical
component of a competitive compensation package.
For fiscal 1996, payments under the Incentive Compensation Plan for the
Company's executive officers were based upon the achievement of a
predetermined goal for the Company's pre-tax income for that period. As
contemplated by the Plan, this goal and the other provisions discussed below
were communicated to the executive officers and other participants in the Plan
early in the fiscal year. Executive officers (other than the Chief Executive
Officer, whose award is discussed below) were assigned target awards equal to
40% or 50% of base salary. These target award levels are comparable to, or
somewhat below, those for similar positions in both market groups discussed
above. A participant's target award, or a greater or lesser amount, is earned
based upon the extent to which the pre-tax income goal was met. To provide
additional incentive to achieve outstanding performance, payouts under the
Plan could reach a maximum of 150% of target amounts if the pre-tax income
goal was exceeded by a specified level. Minimum amounts, at 40% of target
amounts, were to be paid only if a specified threshold level of pre-tax income
was achieved. Awards earned based on the Company's financial performance could
be further adjusted (increased by up to 25% or decreased by up to 100%) based
on individual performance. No awards would be paid in any event, however,
unless the Company achieved a net profit in fiscal 1996, paid dividends to all
stockholders, and generated positive operating cash flow after giving effect
to such awards. The Committee also retained the discretion to reduce or
eliminate awards if in its judgment operation of the Plan would be detrimental
to Delta or otherwise inappropriate.
For fiscal 1996, Delta's pre-tax income exceeded the maximum goal set for
the year. Moreover, the Company's fiscal 1996 financial results compared
favorably with those of its competitors, and Delta continued to substantially
strengthen its financial condition over that of prior years by, among other
things, achieving record levels of operating and net income (excluding
restructuring and other non-recurring charges), reducing long-term debt,
increasing stockholders' equity and enhancing its liqudity.
Based on the actual pre-tax income achieved, participants under the
Incentive Compensation Plan earned awards at the maximum level for the year.
In view of the Company's strong overall performance, the Committee concluded
that the awards calculated based on the Company's pre-tax income results
should be paid. As permitted by the Plan, the Committee then adjusted the
award amounts to reflect other aspects of individual and corporate performance
during the year, including a downward adjustment for all Plan participants for
internal corporate equity purposes.
Stock-Based Awards
The 1989 Stock Incentive Plan is a stock-based incentive compensation plan
under which employees selected by the Committee may receive awards of stock
options, stock appreciation rights, restricted stock and other stock-based
awards. The Committee annually considers what type of long-term award to grant
under the Plan. The Company strongly encourages participants, through formal
stock ownership guidelines, to hold the Common Stock received under the Plan
so that participants' interests will continue to be aligned with the long-term
interests of the Company's stockholders.
The Committee granted non-qualified stock options to executive officers and
other eligible employees in January 1996 at an exercise price per share equal
to $71, the closing price of the Common Stock on the New York Stock Exchange
on the date of grant. These stock options are exercisable beginning one year,
and ending ten years, after the grant date.
14
<PAGE>
The award size guidelines under which grants are made vary by level of
responsibility. The guidelines were set to yield award opportunities that,
when expressed as a percentage of base salary, were somewhat higher than the
average award opportunities for comparable positions at the general industry
companies yet were lower than the average award opportunities found within the
airline industry companies. This approach reflects the Committee's view that
it should emphasize longer-term stock-based compensation in total pay for
executive officers more heavily than did the general industry companies but
that, as with base salaries, total pay should increase to market levels over
time.
To determine the number of shares of stock subject to stock options granted
to each participant, the Committee used an option pricing model to determine
the economic value of the Company's options. In making these grants, the
Committee also considered other factors, including individual performance and
job duties relative to other participants in the Plan. No specific weighting
was assigned to any of these factors. Because its primary goal is to ensure
that awards are competitive on an annualized basis, the Committee did not
consider executive officers' current ownership of Common Stock when making
these grants.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits to $1 million
the annual corporate federal income tax deduction for certain "non-performance
based" compensation paid to the chief executive officer or any of the four
other highest paid officers of a publicly-held corporation. To qualify as
"performance based" under Section 162(m), compensation must be paid solely on
account of the attainment of one or more pre-established, objective
performance goals that are established by a committee of outside directors. In
addition, the material terms of the performance goals must be disclosed to and
approved by the stockholders, and the committee must certify that the
performance goals were achieved.
The Committee has considered the impact of Section 162(m) on the Company's
executive compensation programs, and generally believes that those programs
should comply with the applicable rules to ensure that tax deductions for
executive pay are preserved. To comply with the new requirements, the Company
previously amended its 1989 Stock Incentive Plan to limit the maximum number
of shares of Common Stock subject to stock options that can be granted to any
one person. As discussed in Proposal 3 in this proxy statement, the Company is
seeking stockholder approval of the material terms of the Incentive
Compensation Plan so that payments under that plan qualify as "performance
based" compensation under Section 162(m). The Company's deductions for
executive compensation were not impacted by Section 162(m) during fiscal 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Effective August 15, 1992, Mr. Allen's annual base salary was reduced at his
request from $575,000 to $475,000. His base salary remained at that reduced
rate for four years, until August 16, 1996, when his salary was restored to
$575,000 on a prospective basis upon the recommendation of the Committee and
the approval of the Board. The decision to restore Mr. Allen's voluntary
salary reduction was based on various factors, including the Committee's
determination that Mr. Allen's salary is substantially below the appropriate
level for his position, particularly in view of his job performance; the
Company's outstanding financial results in fiscal 1996; and its overall
strengthened financial position. As discussed above, the Committee focused on
Delta's improved financial position during fiscal 1996 in a number of areas,
including reduced long-term debt, increased stockholders' equity, enhanced
liquidity and upgraded credit ratings. Additionally, Delta's financial results
improved substantially in relation to its competitors.
Under the Incentive Compensation Plan, Mr. Allen's target award for fiscal
1996 was conservatively established at 65% of his base salary, without regard
to his voluntary salary reduction. This target is lower than the average
target awards for chief executive officers in each of the market groups
discussed above. His actual award was based on the Company's achieving the
pre-tax income goal established by the Committee at the
15
<PAGE>
beginning of the fiscal year. Because actual pre-tax income exceeded the goal
established to earn maximum awards, Mr. Allen was entitled to the maximum
amount payable based on the pre-tax income results (150% of his target award).
As discussed above, in view of the Company's excellent fiscal 1996 financial
results and its favorable performance in relation to its competitors, the
Committee concluded that the award should be paid, but subject to the same
downward adjustment process applied by the Committee to all other awards. In
making this decision as it related to Mr. Allen, the Committee considered the
importance of Mr. Allen's leadership in strengthening the Company's
competitive position and the financial success Delta achieved for the year, as
well as the fact that Mr. Allen's overall compensation continues to remain
well below the average of chief executive officers in the two market groups
described above.
In January 1996, the Committee granted Mr. Allen a non-qualified stock
option to purchase 66,000 shares of Common Stock under the 1989 Stock
Incentive Plan. The Committee determined the size and terms of this award in
the same manner as it established the stock option awards to all other
employees who received such grants.
Respectfully submitted,
THE PERSONNEL, COMPENSATION &
NOMINATING COMMITTEE
Gerald Grinstein, Chairman
James L. Broadhead
R. Eugene Cartledge
Mary Johnston Evans
16
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid for the last three fiscal years to the Company's Chief Executive Officer
and its four other most highly compensated executive officers (the "named
executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ----------------------- -------
BONUS
(INCENTIVE OTHER RESTRICTED SECURITIES ALL OTHER
COMPENSATION ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY PLAN) COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
------------------ ---- ------- ------------ ------------ ---------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald W. Allen 1996 475,000 532,594 12,517 0 66,000 0 15,504
Chairman of the Board, 1995 475,000 560,625 11,667 390,000 89,000 0 15,876
President and Chief 1994 475,000 0 8,528 0 89,000 0 18,512
Executive Officer
Harold C. Alger 1996 300,000 237,500 7,909 0 26,000 0 12,796
Executive Vice 1995 287,083 206,250 8,123 145,600 29,000 0 13,061
President-Operations 1994 261,250 0 4,713 0 35,400 0 13,416
Robert W. Coggin 1996 291,250 237,500 7,507 0 26,000 0 12,298
Executive Vice 1995 269,167 187,500 5,518 124,800 25,500 0 12,562
President-Marketing 1994 213,850 0 4,289 0 26,300 0 12,193
Maurice W. Worth 1996 282,500 237,500 7,123 0 26,000 0 11,823
Executive Vice 1995 251,250 187,500 6,375 124,800 19,500 0 12,064
President-Customer 1994 198,017 0 3,865 0 20,200 0 11,094
Service
Thomas J. Roeck, Jr. 1996 285,000 213,216 7,507 0 19,500 0 12,298
Senior Vice President- 1995 277,083 206,250 5,518 124,800 22,000 0 12,562
Finance and Chief 1994 261,250 0 4,713 0 26,300 0 13,416
Financial Officer
</TABLE>
- --------
(1) Represents the amounts, if any, earned under the Company's Incentive
Compensation Plan for services rendered during the specified fiscal year.
Amounts earned in fiscal 1996 were paid in the first quarter of fiscal
1997.
(2) Represents reimbursement for taxes related to payment of life insurance
premiums. None of the named executive officers received compensation in
the form of perquisites in excess of the lesser of $50,000 or 10% of the
total of his annual salary and payments under the Incentive Compensation
Plan.
(3) No awards of restricted stock were made in fiscal 1996. The value of the
awards made in fiscal 1995 is based on the closing price of the Common
Stock ($52.00) on the New York Stock Exchange ("NYSE") on January 26,
1995, the date of grant. On that date, the Personnel, Compensation &
Nominating Committee granted shares of restricted stock to the named
executive officers as follows: Mr. Allen--7,500 shares; Mr. Alger--2,800
shares; Mr. Coggin--2,400 shares; Mr. Worth--2,400 shares; and Mr. Roeck--
2,400 shares. The fiscal 1995 awards of restricted stock will vest on the
earlier of January 26, 2000, or the grantee's retirement at or after his
normal retirement date except that, if a grantee retires prior to his
normal retirement date, 33 1/3% of the restricted stock will vest for each
full year after the second full year that has elapsed between the grant
date and the early retirement date. In certain circumstances, the award
may be subject to forfeiture. Cash dividends on restricted stock are
reinvested in additional shares of Common Stock and are subject to the
same restrictions as the original awards. At June 30, 1996, the total
number of shares and aggregate value (based on the $83.00 closing price of
the Common Stock on the NYSE on June 28, 1996)
17
<PAGE>
of restricted stock, including shares acquired with reinvested dividends,
of the following named executive officers was: Mr. Allen--12,698 shares
valued at $1,053,934; Mr. Alger--4,361 shares valued at $361,963; Mr.
Coggin--3,960 shares valued at $328,680; Mr. Worth--4,476 shares valued at
$371,508; and Mr. Roeck--4,476 shares valued at $371,508.
(4) Represents the number of shares of Common Stock subject to stock options
awarded under the Company's 1989 Stock Incentive Plan.
(5) The Company does not have a plan which meets the definition of a Long Term
Incentive Plan.
(6) In fiscal 1996, the Company paid supplemental group life insurance
premiums for the named executive officers as follows: Mr. Allen--$15,504;
Mr. Alger--$9,796; Mr. Coggin--$9,298; Mr. Worth--$8,823; and Mr. Roeck--
$9,298. The Company made contributions under the Delta Family-Care Savings
Plan, a qualified defined contribution pension plan, for the named
executive officers as follows: Mr. Allen--$0; Mr. Alger--$3,000; Mr.
Coggin--$3,000; Mr. Worth--$3,000; and Mr. Roeck--$3,000.
The following table sets forth certain information regarding awards of stock
options to the named executive officers during fiscal 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
------------------------------------------------------------ ------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE($)(2)
---- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Ronald W. Allen......... 66,000 10.3 71.00 1/24/2006 1,838,100
Harold C. Alger......... 26,000 4.0 71.00 1/24/2006 724,100
Robert W. Coggin........ 26,000 4.0 71.00 1/24/2006 724,100
Maurice W. Worth........ 26,000 4.0 71.00 1/24/2006 724,100
Thomas J. Roeck, Jr..... 19,500 3.0 71.00 1/24/2006 543,075
</TABLE>
- --------
(1) These stock options were granted under the 1989 Stock Incentive Plan. The
exercise price is equal to the closing price of the Common Stock on the
NYSE on January 25, 1996, the date of grant. These grants, which do not
include SARs, become exercisable on January 25, 1997.
(2) These hypothetical grant date present values were determined using the
Black-Scholes model, and include the following material assumptions and
adjustments: an option term of ten years; an interest rate of 5.65%
representing the interest rate on a U.S. Treasury security on the date of
grant with a maturity date corresponding to the option term; a volatility
rate of 28.73% calculated using daily Common Stock prices for the one-year
period prior to the date of grant; a dividend yield of 0.28% representing
the current $0.20 per share annualized dividends divided by the fair
market value of the Common Stock at the date of grant; a reduction of
19.60% to reflect the probability of a shortened option term due to
termination of employment due to death, disability or retirement; and a
reduction of 4.00% to reflect the probability of forfeiture due to other
termination of employment prior to the option expiration date. The actual
value, if any, realized upon the exercise of a stock option will depend on
the excess of the market value of the Common Stock on the date the option
is exercised over the exercise price.
18
<PAGE>
The following table sets forth certain information regarding stock options
and stock appreciation rights exercised by the named executive officers in
fiscal 1996, as well as the number and value of their unexercised in-the-money
stock options and stock appreciation rights at June 30, 1996 (based on the
$83.00 closing price of the Common Stock on the New York Stock Exchange on
June 28, 1996).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END(#) AT FY-END($)
------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Allen......... 6,307 1,243,750 363,000 66,000 7,706,000 792,000
Harold C. Alger......... 65,429 1,504,672 5,000 26,000 49,375 312,000
Robert W. Coggin........ 27,793 827,325 25,500 26,000 790,500 312,000
Maurice W. Worth........ 41,750 1,403,175 0 26,000 0 312,000
Thomas J. Roeck, Jr..... 0 0 116,300 19,500 2,328,588 234,000
</TABLE>
RETIREMENT AND OTHER PLANS
The following table shows the estimated annual pension payable to a non-
pilot employee (before reduction for Social Security benefits and not
accounting for the limitations discussed below), including the persons named
in the Summary Compensation Table, assuming retirement in fiscal 1996 at the
normal retirement age of 65 after selected periods of service under the Delta
Family-Care Retirement Plan ("Pension Plan"), a non-contributory qualified
defined benefit plan. The benefits in the table would be paid in the form of a
joint and 50% survivor annuity.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
30 OR MORE
FINAL AVERAGE 10 YEARS OF 15 YEARS OF 20 YEARS OF 25 YEARS OF YEARS OF
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
200,000 40,000 60,000 80,000 100,000 120,000
400,000 80,000 120,000 160,000 200,000 240,000
600,000 120,000 180,000 240,000 300,000 360,000
800,000 160,000 240,000 320,000 400,000 480,000
1,000,000 200,000 300,000 400,000 500,000 600,000
1,200,000 240,000 360,000 480,000 600,000 720,000
1,400,000 280,000 420,000 560,000 700,000 840,000
</TABLE>
Final average earnings, for purposes of the Pension Plan, are the average of
an employee's annual earnings, based on the employee's salary and payments
received under the Company's Incentive Compensation Plan or broad-based profit
sharing programs, for the 36 consecutive months in the 120-month period
immediately preceding retirement which produces the highest average earnings.
The annual pension benefit is determined by multiplying final average earnings
by 60%, and then reducing such amount for service of less than 30 years and
19
<PAGE>
by 50% of the participant's primary Social Security benefit payable to the
employee. The 50% Social Security offset is reduced for service of less than
30 years with Delta. For purposes of pension benefits under the Pension Plan
and supplemental non-qualified retirement plans discussed below, the current
salaries and years of service for the persons named in the Summary
Compensation Table are as follows: Mr. Allen--$575,000/32 years; Mr. Alger--
$300,000/30 years*; Mr. Coggin--$300,000/35 years; Mr. Worth--$300,000/35
years; and Mr. Roeck--$285,000/9 years. See the Summary Compensation Table on
page 17 for information regarding payments under the Company's Incentive
Compensation Plan. Employees designated by the Personnel, Compensation &
Nominating Committee, including the named executive officers, are eligible to
participate in supplemental, non-qualified retirement plans which provide for
benefits which may not be paid under the Pension Plan due to limits on the
amount of compensation and benefits for qualified plans established by the
Internal Revenue Code of 1986, as amended ("Code").
The Delta Family-Care Disability and Survivorship Plan ("Survivorship Plan")
for eligible non-pilot personnel provides monthly short term disability and
survivorship benefits based on a participant's final average earnings and
years of service, and monthly long term disability benefits based on a
participant's final average earnings. The Survivorship Plan also provides a
lump sum death benefit of up to $50,000. In general, final average earnings,
for purposes of the Survivorship Plan, are (1) for purposes of determining
benefits during the first six months of disability, the employee's monthly
earnings, based on the employee's salary at the time of disability, and (2)
for other purposes, the average of the employee's monthly earnings, based on
the employee's salary and payments received under the Company's Incentive
Compensation Plan or broad-based profit sharing programs, over specified
periods. In the event the employee dies while employed by the Company, the
employee's eligible family members are entitled to receive an amount equal to
50%, 60% or 70% of final average earnings (depending upon whether the employee
has one, two, or three or more eligible family members, respectively), subject
to reduction for service of less than 30 years with Delta and certain benefits
payable under Social Security, the Pension Plan and other sources. Any
benefits which may not be paid under the Survivorship Plan due to Code limits
on the amount of compensation and benefits for such plan, including a post-
retirement lump sum death benefit of up to $50,000, are provided under a
supplemental plan for employees designated by the Personnel, Compensation &
Nominating Committee, including the named executive officers.
- --------
* For 27 of his 30 years of service, Mr. Alger accrued a benefit under non-
contributory qualified retirement plans for pilot personnel established by
the Company pursuant to collective bargaining agreements. The estimated
annual pension benefit payable to Mr. Alger under these plans at normal
pilot retirement age of 60 and with 25 or more years of service is 60% of
his final average earnings under these plans, reduced by 50% of the primary
Social Security benefit that would have been payable to him had he retired
in 1973 at age 65. The normal form of benefit payment is a joint and 50%
survivor annuity; but the benefit may be paid in a single life annuity with
spousal consent. The Company has agreed that Mr. Alger's total benefits will
be no less than they would have been had he been a participant in the
Pension Plan from his original date of employment with the Company. Thus, a
portion of Mr. Alger's total retirement benefits will be paid from these
pilot plans, and the remainder will be paid from the Pension Plan and the
non-qualified plans as described herein.
20
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
with the cumulative total returns on two published indices, the Standard &
Poor's 500 Stock Index and the Standard & Poor's Airline Index, over the
preceding five fiscal years.
CUMULATIVE TOTAL RETURNS(1)
ON $100 INVESTED ON JUNE 30, 1991
LOGO
(1) Cumulative total return is defined as stock price appreciation plus
dividends paid, assuming reinvestment of all such dividends.
(2) The Standard & Poor's Airline Index consists of AMR Corporation, Delta,
Southwest Airlines and USAir.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the firm of Arthur Andersen LLP as independent auditors for the
Company for fiscal 1997, subject to ratification by the stockholders. Arthur
Andersen LLP has served as the Company's independent auditors since 1949. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will have an
21
<PAGE>
opportunity to make a statement if he or she so desires and to respond to
questions. If the stockholders do not ratify the selection of Arthur Andersen
LLP, the Board of Directors will reconsider the selection of independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL 3
APPROVAL OF THE MATERIAL TERMS OF THE INCENTIVE COMPENSATION PLAN
The Incentive Compensation Plan ("Plan") is intended to enhance the link
between pay and performance by providing eligible employees with the
opportunity to receive an annual cash award based on the achievement of pre-
established performance goals. The material terms of the Plan are being
submitted to stockholders for their approval so payments to executive officers
under the Plan may qualify as "performance based" compensation under Section
162(m) of the Internal Revenue Code. As described in the Report on Executive
Compensation on page 15 of this proxy statement, Section 162(m) generally
limits to $1 million the annual corporate federal income tax deduction for
"non-performance based" compensation paid to the chief executive officer or
any of the four other highest paid officers of a publicly-held corporation.
A. Summary of the Plan
The following summary description of the Plan is qualified in its entirety
by reference to the full text of the Plan attached to this proxy statement as
Appendix A.
Purposes. The purposes of the Plan are to: (1) increase the incentives to
participants to achieve annual goals that are within group and/or individual
control and are considered key to the Company's success; (2) encourage
teamwork among participants in various segments of the Company; and (3) reward
performance with pay that varies in relation to the extent to which the pre-
established goals are achieved.
Administration. The Plan will be administered by a committee ("Committee")
of two or more directors appointed by the Board of Directors to administer the
Plan. All members of the Committee must be "outside directors" under Section
162(m). Subject to the terms of the Plan, the Committee has authority to
select employees to participate in the Plan; to determine the size, terms and
conditions of awards under the Plan; to construe and interpret the Plan; and
to make all other determinations which may be necessary or advisable for Plan
administration. The Plan is currently being administered by the Personnel,
Compensation & Nominating Committee of the Board of Directors.
Eligibility. All full-time, salaried employees of the Company and its
subsidiaries who are deemed by the Committee to be key employees are eligible
to participate in the Plan.
Awards Under the Plan. Not later than 90 days after the beginning of each
fiscal year, the Committee will select one or more performance measures,
establish written performance goals with respect to each selected performance
measure and determine the award opportunities for that fiscal year.
The performance measures may be based on any combination of corporate,
divisional and/or individual goals. For each performance measure, the
Committee will establish performance goals which will, in turn, be used to
determine a participant's award opportunities. For example, for a particular
fiscal year, the Committee may select the Company's pre-tax income as a
performance measure, establish various levels of Company
22
<PAGE>
pre-tax income as performance goals and link each such performance goal to an
award opportunity. The performance measures, performance goals and award
opportunities may vary among participants and from year to year.
Following completion of each fiscal year, if the performance goals were met,
the Committee will so certify in writing prior to payment of final awards. As
soon as practicable after the end of the fiscal year, final awards will be
computed for each participant as determined by the Committee. Except as
provided in the Plan with respect to executive officers, the Committee has
discretion to increase, reduce or eliminate any or all final awards that would
otherwise be paid.
The Plan provides that the maximum award payable to any participant in
connection with any one fiscal year is $1.5 million.
Special Rule Applicable to Executive Officers. The Plan contains special
rules applicable only to the Company's executive officers. As defined in the
Plan, an executive officer is a participant who, as of the last day of the
applicable fiscal year, is an officer of the Company at or above the level of
Senior Vice President.
The Plan provides that the performance measures which may serve as
determinants of an executive officer's award opportunities are limited to the
Company's pre-tax income; net income; earnings per share; revenues; expenses;
return on assets; return on equity; return on investment; net profit margin;
operating profit margin; operating cash flow; total shareholder return;
capitalization; liquidity; results of customer satisfaction surveys; and other
measures of quality, safety, productivity or process improvement. Such
performance goals may be determined solely by reference to the performance of
the Company, its subsidiaries, or a division or unit of the Company or its
subsidiaries, or based upon comparisons of any of the performance measures
relative to other companies. In establishing a performance goal with respect
to any of these performance measures, the Committee may exclude the impact of
any event or occurrence which the Committee determines should appropriately be
excluded such as, for example, a restructuring or other non-recurring charge,
an event either not directly related to the operations of the Company or not
within the reasonable control of the Company's management, or a change in
accounting standards required by the Financial Accounting Standards Board.
An executive officer's award opportunities will be established as a function
of his base salary. Base salary means, as to any specific fiscal year, the
executive officer's regular annual salary rate as of the last day of the
fiscal year. The regular annual salary rate is not reduced by any voluntary
salary reductions or any salary reduction contributions made to any salary
reduction plan, defined contribution plan or other deferred compensation plans
of the Company, but does not include any payments under the Plan, the 1989
Stock Incentive Plan, or any other bonuses, incentive pay or special awards.
The Committee has discretion to reduce or eliminate the amount of an award
otherwise payable to an executive officer. Except to the extent permitted by
the following paragraph, the Committee may not exercise discretion to increase
the award otherwise payable to an executive officer.
The Plan also provides that if, on the advice of counsel, the Committee
determines that Section 162(m) will not adversely affect the deductibility for
federal income tax purposes of any amount paid under the Plan by permitting
greater discretion or flexibility with respect to award opportunities for
executive officers, then the Committee may, in its sole discretion, apply such
greater discretion or flexibility.
Payment of Awards. Awards under the Plan are payable within 75 days after
the end of the fiscal year. Subject to the terms of the Company's Executive
Deferred Compensation Plan, a participant may defer the
23
<PAGE>
receipt of some or all of his award. If all or a portion of a participant's
award is not deductible by the Company under Section 162(m), the Committee
may, in its discretion, require that payment of the nondeductible portion of
such award will be deferred until it may be deducted by the Company.
Change in Control. In the event of a change in control of the Company, each
participant, including the Company's executive officers, will, in the sole
discretion of the Committee, receive a pro rata payment of the greater of his
target incentive award or final award for the fiscal year during which the
change in control occurs. In these circumstances, the Committee will determine
(1) the final award based on performance during the fiscal year until the date
of the change in control; and (2) the participant's base salary as of a date
on or before the change in control. Such amount would be paid to the
participant within 75 days after the effective date of the change in control.
A "change in control" is deemed to have occurred (1) when any person
(excluding the Company, its subsidiaries, any employee benefit plan of the
Company or its subsidiaries, or any person appointed or established by the
Company or its subsidiaries for or pursuant to any such employee benefit plan)
has acquired, either directly or indirectly, beneficial ownership of
securities representing 20% or more of the total votes that could be cast by
the holders of all of the Company's securities entitled to vote in elections
of directors; or (2) when the members of the Company's Board of Directors as
of July 1, 1994 (or their successors nominated by a Board on which such
individuals or such successors constituted a majority) cease to constitute a
majority of the Board.
Amendments. The Board of Directors or the Committee may modify, amend,
suspend or terminate the Plan at any time. No such modification, amendment,
suspension or termination may, without a participant's consent, reduce the
participant's right to a payment or distribution under the Plan to which he is
entitled.
B. Other Matters
As discussed above, awards which may be paid under the Plan for fiscal 1997
and future years are dependent on the attainment of performance goals
established annually by the Committee, as well as the Committee's authority,
subject to the terms of the Plan, to increase, reduce or eliminate such
awards. Accordingly, the amounts, if any, which may be paid under the Plan in
the future cannot presently be determined. If the material terms of the Plan
are not approved by the stockholders, no future payments will be made under
the Plan to executive officers. In that event, the Personnel, Compensation &
Nominating Committee intends to review and reconsider the Company's executive
compensation program in light of such vote and the principles described in its
Report on Executive Compensation.
The "Bonus (Incentive Compensation Plan)" column in the Summary Compensation
Table on page 17 of this Proxy Statement sets forth the awards paid under the
Plan for fiscal 1996 for each of the named executive officers. For fiscal
1996, all executive officers (which, for this purpose, included eight officers
of the Company) as a group, and all non-executive officers as a group,
received $1,831,482 and $4,703,020, respectively, under the Plan. The
Personnel, Compensation & Nominating Committee has designated 94 Company
personnel, including the named executive officers, as participants in the Plan
for fiscal 1997.
C. Board Recommendation
The Board of Directors believes the Plan assists the Company to attract and
retain key employees, and strongly reinforces the performance orientation of
the Company's pay philosophy for such employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE MATERIAL TERMS
OF THE PLAN.
24
<PAGE>
PROPOSAL 4
APPROVAL OF DELTASHARE STOCK OPTION PLAN
AND PILOTS STOCK OPTION PLAN
On April 24, 1996, the Board of Directors adopted, subject to stockholder
approval, two broad-based, non-qualified stock option plans (collectively, the
"Plans") for Delta personnel providing for the issuance of stock options to
purchase 24.7 million shares of Common Stock.
The Plans are intended to cover substantially all of Delta's nonofficer
personnel. One plan, the DeltaShare Stock Option Plan, is for approximately
47,000 Delta personnel who are not pilots ("Nonpilot Plan"). The other plan,
the Pilots Stock Option Plan, covers the Company's approximately 8,000 pilots
("Pilot Plan"). The Nonpilot and Pilot Plans involve stock options to purchase
14.7 million and 10 million shares of Common Stock, respectively.
As more fully discussed below, the Plans require the Company to grant non-
qualified stock options in three equal annual installments to eligible Delta
personnel in their individual capacities. Subject to the terms of the Plans,
Delta personnel who receive stock options may purchase from Delta shares of
Common Stock at an exercise price per share equal to the opening price of the
Common Stock on the New York Stock Exchange on the applicable grant date.
Stock options awarded under the Plans are exercisable beginning one year, and
ending ten years, after the applicable grant date; and are not transferable
other than upon the death of the person awarded the stock option. See "Summary
of the Plans" below.
Also on April 24, 1996, the Board of Directors authorized Delta to
repurchase up to 24.7 million shares of its Common Stock and Common Stock
equivalents. Under this authorization, the Company may repurchase up to 6.2
million of these shares before the initial stock option grants under the Plans
become exercisable, and repurchase the remaining shares as Delta personnel
exercise their stock options. The Common Stock repurchase program, which
became effective immediately, is intended to reduce the dilutive effect of the
exercise of stock options under the Plans, and reflects the Board's view that
such repurchases are a good investment for the Company. Repurchases are
subject to market conditions and may be made on the open market or in
privately negotiated transactions. Through August 30, 1996, Delta had
repurchased 2.2 million shares of Common Stock for $163.4 million under this
authorization.
The Board of Directors believes that substantially all Delta personnel
should participate in stock option plans because such plans will provide Delta
people with an increased stake in the Company's financial performance, and are
a cost-effective way to more closely align the interests of Delta people and
the Company's stockholders. In the highly competitive service industry in
which Delta operates, the Board believes it is particularly important to align
Delta people with corporate goals and achievements through a sense of unity,
ownership and shared purpose. With the implementation of the Plans, Delta will
have in place for substantially all Company personnel a compensation program
which includes base salary, profit sharing and stock options.
The number of shares of Common Stock subject to stock options under the
Pilot Plan was negotiated by Delta and the Air Line Pilots Association,
International ("ALPA"), the collective bargaining representative for the
Company's pilots. The Board of Directors determined the size of the Nonpilot
Plan to provide an equivalent potential benefit for nonpilots under the
Nonpilot Plan as pilots may receive under the Pilot Plan, as a percentage of
each group's respective base salary. Because the Nonpilot and Pilot Plans are
related elements of Delta's program to strengthen the link between
compensation and the Company's performance, and to more closely align the
interests of Delta people and the Company's stockholders, the Plans are being
presented to stockholders as one proposal.
25
<PAGE>
Delta's nonpilot personnel have played a significant role in strengthening
the Company's competitive position through participating in a variety of
initiatives which have improved productivity and reduced cost. Many of these
initiatives are continuing, and the Board of Directors believes the Nonpilot
Plan will provide an important incentive to nonpilot personnel to continue to
improve the Company's performance.
The Pilot Plan is an integral part of the new collective bargaining
agreement ("New Pilot Contract") between Delta and ALPA. Delta believes the
New Pilot Contract, which became effective May 1, 1996, strengthens the
Company's competitive position by reducing pilot costs and increasing the
Company's flexibility. A key outcome of the New Pilot Contract is the
formation of Delta Express, a low-fare business unit within Delta that,
beginning October 1, 1996, will operate a dedicated fleet of Boeing 737-200
aircraft in certain highly competitive, leisure-oriented markets within
Delta's system. ALPA has the right to reopen the New Pilot Contract in its
entirety if any required stockholder approval of the Pilot Plan is not
obtained, and Delta and ALPA are unable to reach agreement within 30 days on
providing pilots equivalent value to the Pilot Plan. See "Summary of the New
Pilot Contract" below.
New York Stock Exchange rules provide that stockholder approval is a
prerequisite to listing common stock on the New York Stock Exchange when the
total number of shares of common stock to be issued in a transaction or series
of related transactions (excluding shares of common stock held in treasury)
would equal or exceed 20% of the number of shares of common stock outstanding
before such issuance. Because there were, as of August 30, 1996, 77.0 million
shares of Common Stock outstanding (and 5.9 million shares of Common Stock in
treasury), Delta could, consistent with New York Stock Exchange rules,
implement either the Nonpilot Plan or the Pilot Plan without stockholder
approval. As discussed above, however, the Board of Directors believes it is
in the best interest of the Company and its stockholders to adopt both Plans.
Because the New York Stock Exchange has advised Delta that the Nonpilot and
Pilot Plans are "related transactions" under New York Stock Exchange rules,
stockholder approval is required to adopt both Plans.
The Board of Directors has not determined what action, if any, it would take
if stockholders do not approve the Plans. In the event stockholders do not
approve the Plans and Delta does not otherwise implement the Pilot Plan, there
can be no assurance that ALPA will not exercise its right to reopen the New
Pilot Contract. If ALPA exercises this right, the outcome of the negotiations
between Delta and ALPA cannot presently be determined.
A. Summary of the Plans
The following summary description of the Nonpilot Plan and the Pilot Plan is
qualified in its entirety by reference to the full text of the Plans attached
to this proxy statement as Appendix B and Appendix C, respectively.
Non-Qualified Stock Options. Subject to the terms of the Plans, the Nonpilot
and Pilot Plans require Delta to grant non-qualified stock options in three
annual installments covering a total of 14.7 million and 10 million shares of
Common Stock, respectively, to eligible Delta personnel. Recipients of stock
options may purchase from Delta a specified number of shares of Common Stock
at an exercise price per share equal to the opening price of the Common Stock
on the New York Stock Exchange on the applicable grant date. All stock options
granted under the Plans will be non-qualified for purposes of Section 422 of
the Code.
Administration. The Plans will be administered by the Personnel,
Compensation & Nominating Committee of the Board of Directors ("Committee").
Subject to the terms of the Plans, the Committee will have full authority to
construe and interpret the Plans; to establish appropriate rules and
regulations relating to the Plans; and to take all actions in connection with
the Plans as it may deem necessary, appropriate or advisable to carry
26
<PAGE>
out the provisions of the Plans. The Pilot Plan provides that disputes arising
out of Committee actions with respect to the interpretation, administration or
application of the Pilot Plan will be subject to certain dispute resolution
procedures in the New Pilot Contract.
Grant Dates. Both Plans provide for three annual grant dates.
The Committee will determine the initial grant date under the Nonpilot Plan.
The Nonpilot Plan provides that the second and third grant dates will be the
first and second anniversaries, respectively, of the initial grant date.
Subject to the terms of the Nonpilot Plan, the Company will award non-
qualified stock options covering 4,900,000 shares of Common Stock on each
grant date under the Nonpilot Plan.
The initial grant date under the Pilot Plan will be a date agreed upon by
Delta and ALPA that is within 30 days after the later of (1) the date the
Pilot Plan is approved by the Board of Directors, and if required, the
Company's stockholders; or (2) the date of determination of each participant,
and the number of shares of Common Stock subject to stock options to be
allocated to each participant, on the initial grant date under the Pilot Plan.
The Pilot Plan provides that the second and third grant dates will be the
first and second anniversaries, respectively, of the initial grant date.
Subject to the terms of the Pilot Plan, the Company will grant non-qualified
stock options covering 3,333,334, 3,333,333 and 3,333,333 shares of Common
Stock on the initial, second and third grant dates, respectively, under the
Pilot Plan.
If the stockholders approve the Plans, the initial grants are expected to
occur within 30 days after such approval. The initial grants under the
Nonpilot and Pilot Plans may occur, but are not required to occur, on the same
day.
Eligibility. The Committee will determine the Delta personnel who
participate in the Nonpilot Plan. The Committee anticipates there will be
approximately 47,000 participants in the Nonpilot Plan, generally including
all Delta domestic nonpilot personnel, and international personnel not subject
to a collective bargaining agreement, in permanent positions who have at least
one year of Delta employment and are on active pay status on the applicable
grant date. Officers, directors and participants in other Company-sponsored
stock option plans will not participate in the Nonpilot Plan.
Eligibility to receive a stock option grant under the Pilot Plan is limited
to Delta pilots on the applicable grant date and, if Delta agrees, certain
Delta pilots who retire on or after June 1, 1996. Subject to Delta's approval,
ALPA will determine the participants in the Pilot Plan.
Allocation. The Committee will determine the number of shares of Common
Stock subject to stock options to be allocated to each participant in the
Nonpilot Plan on each grant date. The Committee contemplates making
allocations under the Nonpilot Plan in a manner that is generally based on the
participant's Annual Base Salary (as defined) in comparison to the Annual Base
Salary of all participants in that plan.
Subject to the Company's approval, ALPA will determine the number of shares
of Common Stock subject to stock options to be allocated to each participant
in the Pilot Plan on each grant date.
Exercisability. Stock options awarded under the Plans are exercisable
beginning one year, and ending ten years, after the applicable grant date. A
participant (1) whose employment is terminated by the Company for reasons
other than retirement, death, disability, leave of absence or furlough, or (2)
who resigns from employment with the Company, will immediately forfeit his
unexercised stock options. Stock options so forfeited under the Nonpilot Plan
or the Pilot Plan will be allocated to participants in the applicable plan on
the next ensuing grant date, if any.
27
<PAGE>
Nontransferability. Stock options granted under the Plans will not be
transferable other than upon the death of the participant.
Adjustments. In the event of any merger, reorganization, consolidation,
recapitalization, Common Stock dividend, Common Stock split or other change in
corporate structure affecting the Common Stock, the Committee may make such
adjustments as it deems necessary to reflect such change so as to prevent the
diminution or enlargement of a participant's rights including, but not limited
to, adjustments in (1) the number of shares of Common Stock available for
distribution under the Plans and (2) the exercise price per share of a stock
option.
Common Stock. Shares of Common Stock distributed under the Plans may be
either authorized and unissued shares or treasury shares.
Change in Control. In the event of a Change in Control of the Company, all
stock options not yet granted on the date of such Change in Control will be
granted on such date at an exercise price per share equal to the opening price
of the Common Stock on the New York Stock Exchange on the date of such Change
in Control. Change in Control is defined under both Plans as the direct or
indirect acquisition by a person, entity or group acting in concert, in one or
more related transactions, of (1) securities that constitute and/or are
exchangeable into, exercisable for or convertible into more than 40% of the
Company's outstanding Common Stock or, if stock in addition to Common Stock
has voting power, then 40% of the voting power of all outstanding securities
of the Company entitled to vote generally for the election of Delta's Board of
Directors or similar governing body; or (2) the power or right to (a) manage
or direct the management of all or substantially all of Delta's air carrier
operations; (b) designate or provide all or substantially all of Delta's
officers; (c) provide a majority of the following management services for
Delta: capacity planning, financial planning, strategic planning, market
planning, marketing and sales, technical operations, flight operations, and
human resources activities; (d) appoint or elect or prevent the appointment or
election of a majority of the Company's Board of Directors or similar
governing body; or (e) appoint or elect or prevent the appointment or election
of a minority of Delta's Board of Directors or similar governing body, but
only if such minority has the power or right to appoint or remove Delta's
Chief Executive Officer, or President, or Chief Operating Officer, or the
majority membership of the Executive Committee or similar committee on Delta's
Board of Directors, or the majority membership of at least one-half of Delta's
Board committees.
The definition of Change in Control excludes (1) a corporate restructuring
where a parent holding company is formed, if the stockholders and Board of
Directors of the parent holding company at the closing of such transaction are
substantially the same as those of Delta immediately preceding the
transaction; and (2) any entity that is an Internal Revenue Service qualified
employee benefit plan of Delta (or a parent company of Delta), or a trustee or
other fiduciary of such plan acting in its capacity as such, provided that (a)
the plan is one in which all seniority list pilots who meet the general
service requirements applicable to all participants are entitled to
participate; (b) stock of Delta or any affiliate of Delta allocated to
participant accounts is voted in accordance with the instructions of
participants if any are given; and (c) the trustee voting unallocated stock is
a nationally recognized bank or financial institution.
Amendments. The Board of Directors or the Committee may amend, alter or
discontinue the Nonpilot Plan at any time, but no amendment, alteration or
discontinuation may impair the rights of a participant in that plan with
respect to a previously granted stock option without the participant's
consent. The Pilot Plan may be amended by mutual agreement between the Company
and ALPA.
B. Summary of the New Pilot Contract
Delta's relations with labor unions in the United States are governed by the
Railway Labor Act. Under that statute, collective bargaining agreements in the
airline industry do not expire but instead become amendable as
28
<PAGE>
of a stated date. If either party wishes to modify the terms of any such
agreement, it must notify the other party before the contract becomes
amendable. After receipt of such notice, the parties must meet for direct
negotiations and, if no agreement is reached, either party may request the
National Mediation Board ("NMB") to appoint a federal mediator. If no
agreement is reached in mediation, the NMB may determine, at any time, that an
impasse exists and proffer binding arbitration. Either party may decline to
submit to arbitration. If arbitration is rejected, a 30-day "cooling-off"
period commences, following which the parties may resort to "self-help".
"Self-help" may include, among other things, a strike by the union or the
imposition of proposed changes to the collective bargaining agreement by the
airline.
Delta's prior collective bargaining agreement with ALPA became amendable on
January 1, 1995. Formal negotiations between the Company and ALPA on a new
collective bargaining agreement began in November 1994. In May 1995, the NMB
appointed federal mediators to participate in the collective bargaining
negotiations. Delta and ALPA reached a tentative agreement on certain matters
(which was contingent on the parties reaching agreement on a total contract)
in December 1995, and then resumed discussions on several key subjects,
including compensation matters and equity ownership. On January 22, 1996, the
negotiations continued in Washington, D.C. with the participation of one of
the three NMB members. Shortly thereafter, ALPA distributed to Delta pilots a
ballot seeking their support to withdraw their services, up to and including a
general strike, in the event Delta and ALPA could not reach agreement on a new
collective bargaining agreement.
On February 20, 1996, Delta and ALPA reached a tentative agreement on a new
contract. Following ratification by Delta pilots, the Company and ALPA, on
April 29, 1996, entered into the New Pilot Contract, which became effective on
May 1, 1996. The four-year agreement provides for, among other things, the
following: (1) a 2% reduction in base salaries for four years, after which
period the 2% reduction will be rescinded; (2) reductions in certain other
compensation areas and benefits; (3) certain productivity improvements,
including more flexible staffing requirements; (4) additional pay reductions
and productivity improvements relating to the operation of the Company's B-
737-200 aircraft, subject to certain conditions; (5) job security protections
for currently active pilots and the recall by July 1, 1997 of the
approximately 260 remaining pilots on furlough in May 1996; (6) a prohibition
on the Company's engaging in code sharing with respect to aircraft with over
70 seats that are operated by another U.S. airline, subject to certain
exceptions; (7) restrictions in certain circumstances on the Company's
entering into new code sharing arrangements involving aircraft operated by
foreign airlines; (8) a special early retirement program for up to 500 pilots
(for which Delta recorded a $273 million pre-tax restructuring charge in the
June 1996 quarter); (9) pilot participation in a profit sharing program; (10)
the Pilot Plan described above; and (11) ALPA's right to appoint an associate
non-voting member of Delta's Board of Directors.
The New Pilot Contract provides that, if any required stockholder approval
of the Pilot Plan is not obtained by the day after the Company's 1996 Annual
Meeting of Stockholders, Delta and ALPA will immediately meet to reach
agreement on providing pilots items of equivalent value to the Pilot Plan. If
the parties are unable to reach agreement within 30 days, ALPA has the right
to reopen the New Pilot Contract in its entirety. In these circumstances,
Delta has agreed that, if ALPA so requests, the negotiations will proceed
directly to mediation under the auspices of the NMB (including mediation
conducted by an NMB member), and that Delta will not oppose a request by ALPA
for a release from mediation. Under the Railway Labor Act, the NMB has
discretion when to appoint a mediator and when to begin the 30-day "cooling-
off" period following which the parties may resort to "self-help". ALPA also
has the right to reopen the New Pilot Contract in its entirety if there is a
Change in Control (as defined) of Delta.
As discussed above, Delta believes the New Pilot Contract will improve the
Company's competitive position. Delta currently estimates the New Pilot
Contract, compared to the prior collective bargaining
29
<PAGE>
agreement, will result in total savings of approximately $760 million over its
four-year term, before considering any amounts to be paid under the pilots'
profit sharing program.*
The above information regarding the cost savings that Delta currently
anticipates under the New Pilot Contract is forward-looking, and the actual
results could differ materially from the results that Delta currently
anticipates. The specific factors and events that could cause the actual
results to differ materially from the expected results include, among other
things, (1) ALPA's exercising its right to reopen the New Pilot Contract if
there is a Change of Control of Delta or any required stockholder approval of
the Pilot Plan is not obtained; (2) the number of B-737-200 aircraft that
Delta utilizes under reduced operating costs; (3) aircraft deployment and
utilization rates; and (4) competitive factors and general economic
conditions.
The above summary description of the New Pilot Contract is qualified in its
entirety by reference to the full text of the New Pilot Contract, which has
been filed as Exhibit 10 to Delta's Form 10-Q for the quarter ended March 31,
1996.
C. Other Matters
U.S. Federal Income Tax Consequences. The following is a brief summary of
the U.S. Federal income tax consequences of non-qualified stock options under
the Plans. With respect to such stock options: (1) no income is realized by
the participant at the time the stock option is granted; (2) upon exercise of
the stock option, the participant realizes ordinary income in an amount equal
to the excess of the fair market value on the date of exercise of the shares
of Common Stock purchased over the exercise price for those shares, and Delta
is entitled to a tax deduction in the same amount; (3) Delta is required to
comply with applicable Federal income tax withholding requirements with
respect to the amount of ordinary income recognized by the participant; and
(4) at disposition, any appreciation (or depreciation) after the date of
exercise is treated either as short-term or long-term capital gain (or a
capital loss), depending upon the length of time that the participant has held
the shares.
Common Stock Price. The closing price for the Common Stock on the New York
Stock Exchange on August 30, 1996 was $70.875 per share.
Stockholder Rights Plan. In 1986, the Board of Directors adopted a
Stockholder Rights Plan which is intended to protect stockholders against
unsolicited takeover attempts that do not offer an adequate price to all
stockholders or are otherwise not in the best interest of the Company and its
stockholders. The Stockholder Rights Plan expires on November 4, 1996. The
Board of Directors has not determined what action, if any, it will take with
respect to the expiration of the Stockholder Rights Plan.
- --------
* The pilots' profit sharing program generally provides for profit sharing
payments to eligible pilots for a particular fiscal year equal to the
Company's Profit Performance Level (as defined) multiplied by a pilot's
Annual Base Salary (as defined) for that year, and subtracting from that
product a dollar amount equal to the Offset (as defined). The Profit
Performance Level for a given fiscal year is the Company's pre-tax income
(after giving effect to profit sharing payments and excluding any gains or
losses on the disposition of flight equipment and less preferred stock
dividends) as a percent of the Company's total operating revenues for that
year. No payments are made if the Profit Performance Level is less than 2%;
the maximum Profit Performance Payment is 10%. The Offset for any given
fiscal year is the product of a pilot's Annual Base Salary multiplied by the
lesser of (1) 5%; or (2) the percent of annual base salary (which is
currently also 5%) by which profit sharing awards for such year are reduced
for participants in the Company's profit sharing program for noncontract
published scale personnel.
30
<PAGE>
D. Board Recommendation
As discussed above, the Board of Directors believes the Plans are in the
best interests of the Company and its stockholders. ACCORDINGLY, THE BOARD
RECOMMENDS A VOTE "FOR" APPROVAL OF THE PLANS.
PROPOSAL 5
STOCKHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who is the beneficial owner of 50 shares of
Common Stock, has given notice that she will introduce the following
resolution at the Annual Meeting:
"RESOLVED: That the stockholders of Delta Air Lines, Inc. assembled in
Annual Meeting in person and by proxy, hereby recommend that the
Corporation affirm its political non-partisanship. To this end the
following practices are to be avoided:
(a) The handing of contribution cards of a single political party to
an employee by a supervisor.
(b) Requesting an employee to send a political contribution to an
individual in the Corporation for a subsequent delivery as part of a
group of contributions to a political party or fund raising committee.
(c) Requesting an employee to issue personal checks blank as to payee
for subsequent forwarding to a political party, committee or candidate.
(d) Using supervisory meetings to announce that contribution cards of
one party are available and that anyone desiring cards of a different
party will be supplied one on request to his supervisor.
(e) Placing a preponderance of contribution cards of one party at
mail station locations.
REASONS: The Corporation must deal with a great number of governmental
units, commissions and agencies. It should maintain scrupulous political
neutrality to avoid embarrassing entanglements detrimental to its business.
Above all, it must avoid the appearance of coercion in encouraging its
employees to make political contributions against their personal
inclinations. The Troy (Ohio) News has condemned partisan solicitation for
political purposes by managers in a local company (not Delta).
Last year the owners of 2,173,686 shares, representing approximately 4.6%
of shares voting, voted FOR this proposal.
If you agree, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
Delta, like all corporations, is subject to many federal and state laws and
regulations that govern corporate involvement in partisan political activity.
The Company is committed to full compliance with these laws and regulations.
Delta encourages its employees to participate voluntarily in civic and
community affairs. The Company also respects the right of each employee to
exercise lawfully his or her constitutional right to participate independently
in the political process.
Delta's policies, together with federal and state laws and regulations, are
more than sufficient to meet the concern raised by this proposal. Accordingly,
the Board believes it would serve no purpose for the Company to adopt the
proposed resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
31
<PAGE>
PROPOSAL 6
STOCKHOLDER PROPOSAL
The General Board of Pension and Health Benefits of the United Methodist
Church, 1201 Davis Street, Evanston, Illinois 60201, the beneficial owner of
5,300 shares of Common Stock, has given notice that it will introduce the
resolution set forth below at the Annual Meeting. The resolution is co-
sponsored by the Sisters of St. Ursula, 139 South Mill Road, Rhinebeck, New
York 12572, the beneficial owner of 400 shares of Common Stock.
"WHEREAS, Delta Air Lines is the third largest airline in the United
States, with passenger flights that span the globe. We believe there is an
urgent need for corporate commitment to equal employment opportunity. We
also believe a clear policy opposing all forms of discrimination is a sign
of a socially responsible company. Since a substandard equal employment
opportunity record leaves a company open to expensive legal action, poor
employee morale and even the loss of certain types of business, we believe
it is in the company's and shareholders' interests to have information on
our company's equal employment record available.
In 1994, U.S. corporations spent more than $2.2 billion on legal fees
related to discrimination settlements. The Equal Employment Opportunity
Commission (EEOC) reported that over 155,000 discrimination complaints were
filed in 1994. The high cost of legal expenses, the potential loss of
government contracts and both the social and financial consequences of a
damaged corporate image from discrimination allegations is making this
issue a high priority for shareholders.
Many major employers publicly report their progress in developing a more
diverse workplace. More than 100 major corporations openly release their
EEO-1 information in annual reports or public interest booklets. Capital
Cities/ABC, USAir and Amoco are among the group disclosing EEO statistics
for public review. We believe a report containing the basic information
requested in this resolution keeps the issue high on management's and the
Board of Directors' agenda, and reaffirms our public commitment to equal
employment opportunity. Publicizing our standards is helpful to investors,
and the companies with whom we do business.
RESOLVED: The shareholders request our company prepare a report at
reasonable cost, available to shareholders and employees, reporting on the
following issues. The report, which should exclude confidential
information, shall be available by September, 1997.
1. A chart identifying employees by sex and race in each of the nine
major Equal Employment Opportunity Commission defined job categories
for 1993, 1994, and 1995, listing either actual numbers or percentages
in each category.
2. A summary description of any Affirmative Action policies and
programs to improve performances including job categories where women
and minorities are underutilized. This description should include any
policies and programs specifically oriented toward increasing the
number of managers who are qualified females and/or belonging to ethnic
minorities, and current numbers of persons representing race, gender
and ethnicity in management.
3. A report on any litigation in which the company is involved
concerning race, gender and the physically challenged.
4. A description of any policies and programs utilizing the purchase
of goods and services from minority and/or female owned business
enterprises."
32
<PAGE>
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
The Company is committed to complying with all applicable equal employment
opportunity laws and affirmative action regulations. It is Delta's policy not
to discriminate against any employee or applicant because of race, color,
religion, sex, national origin, age, or disability. Delta also maintains
appropriate affirmative action plans. The Company already complies with
numerous federal, state and local governmental reporting requirements
regarding compliance with equal employment opportunity laws and its
affirmative action plans. The preparation and distribution of an additional
report will not enhance Delta's commitment to the worthy goal of equal
employment opportunity and affirmative action. Moreover, the Board of
Directors believes that requiring preparation and distribution of another
report would be a poor use of Company resources, and should not be approved by
the Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONS
To be considered for inclusion in the Company's 1997 proxy materials under
Securities and Exchange Commission regulations, a stockholder proposal must be
directed to the Corporate Secretary at the Company's principal executive
office address set forth on page one of this Proxy Statement, must be received
by the Company not later than May 19, 1997, and must comply in all respects
with the applicable Securities and Exchange Commission rules and regulations.
The following requirements apply to all stockholder proposals other than
those included in the Company's proxy materials pursuant to Securities and
Exchange Commission rules and regulations.
The Company's By-Laws require a stockholder proposing to nominate persons
for election to the Board of Directors, or to introduce other business, at the
annual meeting of stockholders to give timely written notice to the Corporate
Secretary. To be timely, a stockholder's notice must be delivered to or mailed
and received at the Company's principal executive offices not less than 55
days nor more than 75 days prior to the annual meeting; provided that if the
Board of Directors gives stockholders less than 65 days notice of the annual
meeting and makes prior public disclosure of the date of the annual meeting
less than 65 days prior to the annual meeting, notice by the stockholder to be
timely must be so delivered or mailed and received not later than the close of
business on the 10th day following the day on which the Board of Directors
gave such notice or made such public disclosure of the date of the annual
meeting, whichever first occurs.
The Company's By-Laws further provide that a stockholder's notice proposing
to nominate persons for election to the Board of Directors must contain
certain information including, but not limited to, information relating to
such persons that would be required to be disclosed in proxy solicitations for
the election of directors under Securities and Exchange Commission
regulations. A stockholder's notice proposing to bring other business before
the annual meeting must contain (1) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting; (2) the stockholder's name and address;
(3) the class and number of shares of the Company's capital stock beneficially
owned by the stockholder; and (4) any material interest of the stockholder in
such business.
33
<PAGE>
ANNUAL REPORT
This proxy statement is accompanied, or preceded, by the Company's Annual
Report to Stockholders for the fiscal year ended June 30, 1996. The Annual
Report, which contains financial and other information regarding the Company,
is not incorporated in the proxy statement and is not to be deemed a part of
the proxy soliciting material.
OTHER MATTERS
The Board of Directors knows of no other matters which may come before the
Annual Meeting. If any matters other than those referred to above should
properly come before the meeting, the persons designated by the Board to serve
as proxies will have discretionary authority to vote such proxies in
accordance with their best judgment.
34
<PAGE>
APPENDIX A
DELTA AIR LINES, INC.
INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT OF THE PLAN. Delta Air Lines, Inc., a Delaware corporation
(the "Company"), hereby establishes an annual incentive compensation plan to
be known as "The Delta Air Lines, Inc. Incentive Compensation Plan" (the
"Plan"), as set forth in this document. The Plan permits annual cash awards to
Employees of the Company, based on the achievement of pre-established
performance goals.
The Plan shall become effective as of July 1, 1994 (the "Effective Date")
and shall remain in effect until terminated as provided in Article 12 herein.
1.2 PURPOSE. The purposes of the Plan are to: (a) increase the incentives to
Participants to achieve annual goals that are within group and/or individual
control, and are considered key to the Company's success; (b) encourage
teamwork among Participants in various segments of the Company; and (c) reward
performance with pay that varies in relation to the extent to which the pre-
established goals are achieved.
ARTICLE 2. DEFINITIONS.
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the defined meaning is intended, the term is
capitalized:
2.1 "AWARD OPPORTUNITY" means the various levels of incentive award payouts
which a Participant may earn under the Plan, including Target Incentive
Awards, as established by the Committee pursuant to Sections 5.1 and 5.2
herein.
2.2 "BOARD" OR "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.3 "CHANGE IN CONTROL" shall be deemed to have occurred:
(a) When any person (as that term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, but excluding the Company,
or any Subsidiary, or any employee benefit plan of the Company or any
Subsidiary, or any person organized, appointed or established by the
Company or any Subsidiary for or pursuant to the terms of any such plan),
has acquired, either directly or indirectly, beneficial ownership of
securities representing twenty percent (20%) or more of the total votes
that could be cast by the holders of all of the Company's outstanding
securities entitled to vote in elections of Directors; or
(b) When individuals constituting the Board as of the Effective Date (or
the successors of such individuals nominated by a Board of Directors on
which such individuals or such successors constituted a majority) cease to
constitute a majority of the Board of Directors.
2.4 "CODE" means the Internal Revenue Code of 1986, as amended.
2.5 "COMMITTEE" means a committee of two (2) or more individuals, all of
whom shall be "outside directors" within the meaning of the Regulations under
Code Section 162(m), appointed by the Board to administer the Plan, pursuant
to Article 3 herein.
A-1
<PAGE>
2.6 "COMPANY" means Delta Air Lines, Inc., a Delaware corporation (including
any and all Subsidiaries), and any successor thereto.
2.7 "DISABILITY" means a disability which would qualify the Participant for
Long-Term Disability benefits as defined in Section 4.03 of the Delta Family-
Care Disability and Survivorship Plan, as may be amended from time to time.
2.8 "EFFECTIVE DATE" means the date the Plan becomes effective, as set forth
in Section 1.1 herein.
2.9 "EMPLOYEE" means a full-time, salaried employee of the Company.
2.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.11 " EXECUTIVE OFFICER" means a Participant who, as of the last day of the
applicable Plan Year, is an officer of the Company at or above the level of
Senior Vice President.
2.12 "FINAL AWARD" means the actual award earned during a Plan Year by a
Participant, as determined by the Committee.
2.13 "PARTICIPANT" means an Employee who is actively participating in the
Plan.
2.14 "PLAN YEAR" means the Company's fiscal year.
2.15 "RETIREMENT" shall have the meanings ascribed to Early, Normal or
Deferred Retirement in the Company's defined benefits tax-qualified retirement
pension plan applicable to the Participant.
2.16 "SUBSIDIARY" means any corporation (other than the Company) in which
the Company or a Subsidiary of the Company owns fifty percent (50%) or more of
the total combined voting power of all classes of stock.
2.17 "TARGET INCENTIVE AWARD" means the award which may be paid to a
Participant when "targeted" performance results, as established by the
Committee, are attained.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall initially be administered by the
Personnel, Compensation & Nominating Committee of the Board. Subject to the
terms of this Plan, the Board may appoint a successor Committee to administer
the Plan. The members of the Committee shall be appointed by, must be members
of, and shall serve at the discretion of, the Board.
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions herein, the
Committee shall have full power to select Employees who shall participate in
the Plan; determine the size and types of Award Opportunities and Final
Awards; determine the terms and conditions of Award Opportunities in a manner
consistent with the Plan; construe and interpret the Plan and any agreement or
instrument entered into under the Plan; establish, amend, or waive rules and
regulations for the Plan's administration; and (subject to the provisions of
Article 8 herein) amend the terms and conditions of any outstanding Award
Opportunity to the extent such terms and conditions are within the sole
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all
A-2
<PAGE>
other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate
its authority hereunder.
3.3 DECISIONS BINDING. All determinations and decisions of the Committee as
to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding, and conclusive upon
all parties.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. All Employees who are deemed by the Committee to be key
employees shall be eligible to participate in the Plan for such Plan Year.
4.2 PARTICIPATION. No later than ninety (90) days after the beginning of
each Plan Year, the Committee shall determine participation in the Plan based
upon the criteria set forth in Section 4.1 herein. Employees who are chosen to
participate in the Plan in any given Plan Year shall be so notified in
writing, and shall be apprised of the performance measure(s), performance
goal(s), and related Award Opportunities for the relevant Plan Year, as soon
as is practicable.
4.3 PARTIAL PLAN YEAR PARTICIPATION. An Employee who becomes eligible after
the beginning of a Plan Year may participate in the Plan for that Plan Year;
however, such Employee's Target Incentive Award shall be prorated to reflect
his or her months of participation during the Plan Year. Such situations may
include, but are not limited to (a) new hires; (b) when an Employee is
promoted to a position which meets the eligibility criteria; or (c) when an
Employee is transferred from an affiliate which does not participate in the
Plan.
The Committee, in its sole discretion, retains the right to prohibit or
allow participation in the initial Plan Year of eligibility for any of the
aforementioned Employees.
4.4 NO RIGHT TO PARTICIPATE. No Participant or other Employee shall at any
time have a right to be selected for participation in the Plan for any Plan
Year, despite having previously participated in the Plan.
ARTICLE 5. AWARD DETERMINATION
5.1 PERFORMANCE MEASURES AND PERFORMANCE GOALS. No later than ninety (90)
days after the beginning of each Plan Year, the Committee shall select
performance measures and shall establish in writing performance goals for that
Plan Year. Except as provided in Article 8 herein, the performance measures
may be based on any combination of corporate, divisional, and/or individual
goals.
For each Plan Year, the Committee shall establish ranges of attainment of
the performance goals which will correspond to various levels of Award
Opportunities. Each performance goal range shall include a level of
performance at which one hundred percent (100%) of the Target Incentive Award
may be earned. In addition, each range shall include levels of performance
above and below the one hundred percent (100%) performance level at which a
greater or lesser percent of the Target Incentive Award may be earned.
After the performance goals are established, the Committee will align the
achievement of the performance goals with the Award Opportunities (as
described in Section 5.2 herein), such that the level of achievement of the
pre-established performance goals at the end of the Plan Year will determine
the Final Awards. Except as provided in Article 8 herein, the Committee shall
have the authority to exercise discretion in the determination of Final
Awards.
A-3
<PAGE>
The Committee may establish one or more Company-wide performance measures
which must be achieved for any Participant to receive a Final Award payment
for that Plan Year.
Following the completion of each Plan Year, if the performance goals were
met, the Committee shall certify in writing prior to payment of Final Awards
that the performance goals for such Plan Year were satisfied.
5.2 AWARD OPPORTUNITIES. No later than ninety (90) days after the beginning
of each Plan Year, the Committee shall establish, in writing, Award
Opportunities which correspond to various levels of achievement of the pre-
established performance goals. The established Award Opportunities may vary in
relation to the job classification of each Participant or among Participants
in the same job classification. Except as provided in Article 8 herein, in the
event a Participant changes job levels during a Plan Year, the Participant's
Award Opportunity may be adjusted to reflect the amount of time at each job
level during the Plan Year.
5.3 ADJUSTMENT OF PERFORMANCE GOALS AND AWARD OPPORTUNITIES. Once
established, performance goals normally shall not be changed during the Plan
Year. However, except as provided in Article 8 herein, if the Committee
determines in its sole discretion that external changes or other unanticipated
business conditions have materially affected the fairness of the goals, then
the Committee may approve appropriate adjustments to the performance goals
(either up or down) during the Plan Year as such goals apply to the Award
Opportunities of specified Participants.
Notwithstanding any other provision of this Plan, in the event of any change
in corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a spin-
off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368), or any partial or complete liquidation of
the Company, such adjustment shall be made in the Award Opportunities and/or
the performance measures or performance goals related to then-current
performance periods, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that subject to Article 8 herein, any such
adjustment shall not be made if it would eliminate the ability of Award
Opportunities held by Executive Officers to qualify for the "performance-based
compensation" exception under Code Section 162(m).
5.4 FINAL AWARD DETERMINATIONS. As soon as practicable after the end of each
Plan Year, Final Awards shall be computed for each Participant as determined
by the Committee. Subject to the terms of Article 8 herein, Final Award
amounts may vary above or below the Target Incentive Award, based on the level
of achievement of the pre-established corporate, divisional, and/or individual
performance goals. Except as provided in Article 8 herein, the Committee shall
have discretion to increase, reduce or eliminate any or all Final Awards that
otherwise would be paid; provided however, the Committee may determine prior
to the end of the Plan year that it will not exercise such discretion.
5.5 AWARD LIMIT. The Committee may establish guidelines governing the
maximum Final Awards that may be earned by Participants (either in the
aggregate, by Employee class, or among individual Participants) in each Plan
Year. The guidelines may be expressed as a percentage of Company-wide goals of
financial measures, or such other measures as the Committee shall from time to
time determine; provided, however, that the maximum payout with respect to a
Final Award payable to any one Participant in connection with performance in
any one Plan Year shall be one million five hundred thousand dollars
($1,500,000).
5.6 THRESHOLD LEVELS OF PERFORMANCE. The Committee may establish minimum
levels of performance goal achievement, below which no payouts of Final Awards
shall be made to any Participant.
A-4
<PAGE>
ARTICLE 6. PAYMENT OF FINAL AWARDS
6.1 FORM AND TIMING OF PAYMENT. Unless a deferral election is made by a
Participant pursuant to Section 6.2 herein, or deferral of all or a portion of
a Participant's Final Award is required by Section 6.3, each Participant's
Final Award shall be paid in cash, in one lump sum, within seventy-five (75)
days after the end of each Plan Year.
6.2 VOLUNTARY DEFERRAL OF FINAL AWARD PAYOUTS. A Participant may defer
receipt of some or all payments otherwise due under the Plan pursuant to the
terms of the Company's Executive Deferred Compensation Plan.
6.3 DEFERRAL OF FINAL AWARD PAYOUTS. In the event that all or a portion of a
Participant's Final Award is not deductible by the Company due to limits
contained in Code Section 162(m) or any successor Code Section, the Committee
may, in its discretion, require that payment of the nondeductible portion of
such Final Award shall be deferred until such time as it may be deducted by
the Company, subject to such terms and conditions as the Committee determines
to be appropriate. Rates of interest on such deferred amounts shall be
determined by the Committee in a manner consistent with the requirements of
Code Section 162(m) and the Regulations thereunder.
6.4 UNSECURED INTEREST. No Participant or any other party claiming an
interest in amounts earned under the Plan shall have any interest whatsoever
in any specific asset of the Company. To the extent that any party acquires a
right to receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company.
ARTICLE 7. TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT. In the
event Participant's employment is terminated by reason of death, Disability,
or Retirement, the Final Award determined in accordance with Section 5.4
herein shall be reduced to reflect participation prior to termination only.
The reduced award shall be determined by multiplying said Final Award by a
fraction, the numerator of which is the number of days of employment in the
Plan Year through the date of employment termination, and the denominator of
which is three hundred sixty-five (365). In the case of a Participant's
Disability, the employment termination shall be deemed to have occurred on the
date that the Committee determines the definition of Disability to have been
satisfied.
The Final Award thus determined shall be paid within seventy-five (75) days
following the end of the Plan Year in which employment termination occurs.
7.2 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated for any reason other than death,
Disability, or Retirement (of which the Committee shall be the sole judge),
the Participant's opportunity to receive a Final Award for the Plan Year then
in progress shall be forfeited. Except as provided in Article 8 herein, the
Committee, in its sole discretion, may pay a prorated award for the portion of
the Plan Year that the Participant was employed by the Company, computed as
determined by the Committee.
ARTICLE 8. EXECUTIVE OFFICERS
8.1 APPLICABILITY OF ARTICLE 8. The provisions of this Article 8 shall apply
only to Executive Officers. Except as provided in Article 11 herein, in the
event of any inconsistencies between this Article 8 and the other Plan
provisions as they pertain to Executive Officers, the provisions of this
Article 8 shall control.
A-5
<PAGE>
8.2 ESTABLISHMENT OF AWARD OPPORTUNITIES. Except as provided in Section 8.7
herein, Award Opportunities for Executive Officers shall be established as a
function of each Executive Officer's Base Salary (as defined below). No later
than ninety (90) days after the beginning of each Plan Year, the Committee
shall establish, in writing, various levels of Final Awards which may be paid
with respect to specified levels of attainment of the pre-established
performance goals.
For purposes of this Article 8, "Base Salary" shall mean, as to any specific
Plan Year, a Participant's regular annual salary rate as of the last day of
the Plan Year. Regular salary shall not be reduced by any voluntary salary
reductions or any salary reduction contributions made to any salary reduction
plan, defined contribution plan or other deferred compensation plans of the
Company, but shall not include any payments under this Plan, the 1989 Stock
Incentive Plan, or any other bonuses, incentive pay, or special awards.
8.3 COMPUTATION OF FINAL AWARDS. Each Executive Officer's Final Award shall
be based on: (a) the Executive Officer's Target Incentive Award; (b) the
potential Final Awards corresponding to various levels of achievement of the
pre-established performance goals, as established by the Committee; and (c)
Company performance in relation to the pre-established performance goals.
Except as provided in Section 8.7 herein, performance measures which may serve
as determinants of Executive Officers' Award Opportunities shall be limited to
the Company's Pretax Income, Net Income, Earnings Per Share, Revenues,
Expenses, Return on Assets, Return on Equity, Return on Investment, Net Profit
Margin, Operating Profit Margin, Operating Cash Flow, Total Shareholder
Return, Capitalization, Liquidity, Results of Customer Satisfaction Surveys,
and other measures of Quality, Safety, Productivity or Process Improvement.
Such performance goal may be determined solely by reference to the performance
of the Company, a Subsidiary, or a division or unit of either of the
foregoing, or based upon comparisons of any of the performance measures
relative to other companies. In establishing a performance goal, the Committee
may exclude the impact of any event or occurrence which the Committee
determines should appropriately be excluded such as, for example, a
restructuring or other non-recurring charge, an event either not directly
related to the operations of the Company or not within the reasonable control
of the Company's management, or a change in accounting standards required by
the Financial Accounting Standards Board.
8.4 NO MID-YEAR CHANGE IN AWARD OPPORTUNITIES. Except as provided in Section
8.7 herein, each Executive Officer's Final Award shall be based exclusively on
the Award Opportunity levels established by the Committee pursuant to Section
8.2 above.
8.5 NONADJUSTMENT OF PERFORMANCE GOALS. Except as provided in Section 8.7
herein, performance goals shall not be changed following their establishment,
and Executive Officers shall not receive any payout when the minimum
performance goals are not met or exceeded.
8.6 INDIVIDUAL PERFORMANCE AND DISCRETIONARY ADJUSTMENTS. Except as provided
in the second sentence of this Section 8.6 and in Section 8.7 herein,
subjective evaluations of individual performance of Executive Officers shall
not be reflected in their Final Awards. However, the Committee shall have the
discretion to reduce or eliminate the amount of the Final Award otherwise
payable to an Executive Officer.
8.7 POSSIBLE MODIFICATIONS. If, on the advice of the Company's counsel, the
Committee determines that Code Section 162(m) and the Regulations thereunder
will not adversely affect the deductibility for federal income tax purposes of
any amount paid under the Plan by permitting greater discretion and/or
flexibility with respect to Award Opportunities granted to Executive Officers
pursuant to this Article 8, then the Committee may, in its sole discretion,
apply such greater discretion and/or flexibility to such Award Opportunities
as is consistent
A-6
<PAGE>
with such advice and the terms of this Plan, and, to the extent permitted by
such advice, without regard to the restrictive provisions of this Article 8.
In addition, in the event that changes are made to Code Section 162(m) or
the Regulations thereunder to permit greater flexibility with respect to any
Award Opportunities under the Plan, the Committee may exercise such greater
flexibility consistent with the terms of the Plan and, to the extent of such
changes, without regard to the restrictive provisions of this Article 8.
ARTICLE 9. RIGHTS OF PARTICIPANTS
9.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of
the Company.
9.2 NONTRANSFERABILITY. No right or interest of any Participant in the Plan
shall be assignable or transferable, or subject to any lien, directly, by
operation of law or otherwise, including, but not limited to, execution, levy,
garnishment, attachment, pledge, and bankruptcy.
ARTICLE 10. BENEFICIARY DESIGNATION.
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each designation will revoke all
prior designations by the same Participant, shall be in a form prescribed by
the Committee, and will be effective only when filed by the Participant in
writing with the Committee during his or her lifetime. Beneficiary
designations filed with respect to predecessor plans prior to the adoption of
this Plan shall be effective with respect to this Plan. In the absence of any
such designation, benefits remaining unpaid at the Participant's death shall
be paid to the Participant's estate.
ARTICLE 11. CHANGE IN CONTROL
In the event of a Change in Control, each Participant shall, in the sole
discretion of the Committee, receive a pro rata payment of the greater of his
or her Target Incentive Award or Final Award for the Plan Year during which
such Change in Control occurs, as determined by the Committee. In such
circumstances the Committee shall determine the Final Award based upon
performance during the Plan Year until the date of the Change in Control, and
shall determine the Participant's base salary as of a date on or before the
Change in Control. Such proration shall be determined as a function of the
number of days within the Plan Year prior to the effective date of the Change
in Control, in relation to three hundred sixty-five (365). Such amount shall
be paid in cash to each Participant within seventy-five (75) days after the
effective date of the Change in Control.
ARTICLE 12. AMENDMENTS
The Committee or the Board, without notice, at any time and from time to
time, may modify or amend, in whole or in part, any or all of the provisions
of the Plan, or suspend or terminate it entirely; provided, however, that no
such modification, amendment, suspension, or termination may, without the
consent of a Participant (or his or her beneficiary in the case of the death
of the Participant), reduce the right of a Participant (or his or her
beneficiary as the case may be) to a payment or distribution hereunder to
which he or she is entitled.
A-7
<PAGE>
ARTICLE 13. MISCELLANEOUS
13.1 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the state of Georgia.
13.2 WITHHOLDING TAXES. The Company shall have the right to deduct from all
payments under the Plan any foreign, Federal, state, or local income or other
taxes required by law to be withheld with respect to such payments. Before
payment of any Final Award may be deferred under Article 6, the Company may
require that the Participant pay or agree to withholding for any foreign,
Federal, state or local income or other taxes which may be imposed on any
amount deferred.
13.3 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
13.4 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
13.5 COSTS OF THE PLAN. All costs of implementing and administering the Plan
shall be borne by the Company.
13.6 SUCCESSORS. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
13.7 OTHER PLANS. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
A-8
<PAGE>
APPENDIX B
DELTA AIR LINES, INC.
DELTASHARE STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT
Delta Air Lines, Inc., a Delaware corporation (the "Company"), hereby
establishes the DeltaShare Stock Option Plan as set forth herein. The purpose
of the Plan is to promote the interests of the Company by providing eligible
personnel with a greater incentive to make material contributions to the
Company's success by increasing their proprietary interest in the Company
through increased direct stock ownership, all to the benefit of the Company
and its stockholders. The Plan shall become effective as of the date specified
in Article 10 hereof.
The description of the Plan which follows shall be qualified in its entirety
by such rules, procedures and operating guidelines as may be adopted from time
to time by the Committee (as defined below) pursuant to Article 8 hereof with
respect to Company personnel who are employed outside the United States.
ARTICLE 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below and, when the defined meaning is intended, the term is capitalized:
2.1 "ANNUAL BASE SALARY" means, unless otherwise defined by the Committee in
its sole discretion, a Participant's annual base earnings paid to him for
services rendered to the Company as an employee during the twelve-month period
ending on a specific Grant Determination Date, which amount includes longevity
pay, license premium and flight pay, and excludes overtime pay, shift
differential, displacement allowance, incentive compensation, bonuses,
supplemental salary payments, expense reimbursements, expense allowances,
imputed income, amounts paid in lieu of earned and accrued vacation, foreign
duty allowance, termination allowances (severance pay), sick leave bank
payouts for former employees of Western Air Lines, Inc., payments under any
qualified or non-qualified employee benefit plans sponsored by the Company,
profit sharing awards or any other annual incentive compensation programs
sponsored by the Company.
2.2 "BOARD" OR "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.3 "COMMITTEE" means the Committee referred to in Article 3 of the Plan. If
at any time no Committee shall be designated, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
2.4 "COMPANY" means Delta Air Lines, Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.
2.5 "DISABILITY", "SHORT-TERM DISABILITY" AND "LONG-TERM DISABILITY" mean
disability as determined under a short-term or long-term disability plan of
the Company, as applicable to the Participant.
2.6 "EXERCISE PERIOD" means the period of time between the date a Stock
Option becomes excercisable and the tenth anniversary of that Stock Option's
Grant Date, when the Stock Option expires.
2.7 "FAIR MARKET VALUE" means, as of any given date, the opening price of
the Stock on the New York Stock Exchange or, if no sale of Stock occurs on the
New York Stock Exchange on such date, the opening price of the Stock on the
New York Stock Exchange on the last preceding day on which such sale occurred.
B-1
<PAGE>
2.8 "FURLOUGH" means removal from the Company's service due to a reduction
in force.
2.9 "GRANT DATE" means the date on which each installment of Stock Options
is awarded under the Plan. The initial Grant Date shall be determined by the
Committee. The second Grant Date shall be the first anniversary of the initial
Grant Date. The third Grant Date shall be the second anniversary of the
initial Grant Date.
2.10 "GRANT DETERMINATION DATE" means the September 30th prior to each Grant
Date, or such other date as may be established by the Committee.
2.11 "LEAVE OF ABSENCE" means Company approved absence from the Company's
service without pay for personal reasons.
2.12 "OPTION PRICE" means the price at which a share of Stock covered by a
Stock Option may be purchased, as specified in Article 6.3 below.
2.13 "PARTICIPANT" means the recipient of an award of a Stock Option under
the Plan.
2.14 "PLAN" means the DeltaShare Stock Option Plan, as amended from time to
time.
2.15 "RETIREMENT" OR "RETIRED" means retirement from active employment with
the Company pursuant to the Company's written policies governing retirement
from the Company.
2.16 "STOCK" means the Common Stock, U.S. $3.00 par value, of the Company.
2.17 "STOCK OPTION" means the option to purchase shares of Stock granted
pursuant to Article 6 below. All Stock Options granted pursuant to the Plan
shall be deemed "non-qualified" for purposes of Section 422 of the U.S.
Internal Revenue Code of 1986, as amended from time to time, and any successor
thereto.
ARTICLE 3. ADMINISTRATION
3.1 THE ADMINISTRATOR. The Plan shall be administered by the Personnel,
Compensation & Nominating Committee of the Board of Directors, or such other
committee of the Board as may be designated by the Board from time to time.
Each director, while serving as a member of the Committee, shall be considered
to be acting in his capacity as a director of the Company. Members of the
Committee shall be appointed from time to time for such terms as the Board
shall determine, and may be removed by the Board at any time with or without
cause.
3.2 THE COMMITTEE'S AUTHORITY. The Committee shall have full authority to
construe and interpret the Plan, to establish, amend and rescind appropriate
rules and regulations relating to the Plan, to administer the Plan, to
determine the persons to whom and the time or times at which to grant awards
thereunder, and to take all such steps and make all such determinations in
connection with the Plan and the Stock Options granted thereunder as it may
deem necessary or advisable to carry out the provisions and intent of the
Plan, provided that any decision, determination or action of the Committee
with respect to the Plan shall be consistent with the terms of the Plan. All
determinations of the Committee shall be by a majority of its members, and the
Committee's determinations if consistent with the terms of the Plan shall be
final and conclusive for all purposes and upon all persons. The Committee may
delegate its authority hereunder.
B-2
<PAGE>
ARTICLE 4. STOCK SUBJECT TO PLAN
4.1 STOCK RESERVED. The total number of shares of Stock reserved and
available for distribution under the Plan shall be 14,700,000, subject to
adjustment as provided in Article 4.2. Stock issued under the Plan may be
either authorized and unissued shares or treasury shares.
4.2 CERTAIN CHANGES IN CORPORATE STRUCTURE. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, Stock split
or other change in corporate structure affecting the Stock, the Committee, in
its sole discretion, shall make such adjustments as it deems necessary to
reflect such change so as to prevent the diminution or enlargement of a
Participant's rights, including but not limited to, adjustments in the
aggregate number of shares of Stock reserved for issuance under the Plan, and
adjustments in the Option Price, provided that the number of shares of Stock
subject to any award shall always be a whole number. If any of the foregoing
events occur affecting the Stock and there is an adjustment to the then
outstanding non-qualified stock options under the last paragraph of Section 3
of the Company's 1989 Stock Incentive Plan (or the corresponding provision of
any successor plan) for officers and key employees, the Stock Options under
the Plan shall be adjusted in a manner no less favorable to the Participant
than the adjustment for the then outstanding non-qualified stock options under
the last paragraph of Section 3 of the Company's 1989 Stock Incentive Plan (or
the corresponding provision of any successor plan).
ARTICLE 5. ELIGIBILITY
5.1 ELIGIBLE PERSONNEL. The Committee shall have sole discretion to
determine personnel who are eligible to participate in the Plan. Unless
otherwise determined by the Committee, (a) all domestic nonpilot, U.S. dollar
paid personnel of the Company in permanent positions (including those based in
Puerto Rico and the U.S. Virgin Islands) who have completed at least one year
of employment with the Company on the applicable Grant Date and are on active
pay status, Short-Term Disability or temporary Leaves of Absence (i.e., less
than six months) on the applicable Grant Determination Date, and (b) all
international personnel of the Company in permanent positions who are not
subject to a collective bargaining agreement, have completed at least one year
of employment with the Company on the applicable Grant Date and are on active
pay status, Short-Term Disability or temporary Leaves of Absence (i.e., less
than six months) on the applicable Grant Determination Date, are eligible to
be granted awards under the Plan on the applicable Grant Date.
5.2 INELIGIBLE PERSONNEL. Unless otherwise determined by the Committee,
personnel who are in the following categories on the applicable Grant
Determination Date shall not be eligible to be granted awards under the Plan
on the applicable Grant Date: associates; pilots (flight line or management);
international personnel who are subject to a collective bargaining agreement,
including but not limited to such personnel in Austria, Brazil, Germany,
Greece, Italy, India and Mexico; personnel employed by a subsidiary,
partnership, limited partnership, joint venture or similar entity involving
the Company; seasonal, intern, co-op, college programs, ready reserve, and
retiree reserve personnel; personnel on long-term Leaves of Absence, Long-Term
Disability, Furlough, Quality Time Out, military leave, or Retirement status;
and officers, directors and participants in other Company-sponsored stock
option programs.
5.3 ELIGIBLE PERSONNEL WHO BECOME INELIGIBLE BETWEEN GRANT DETERMINATION
DATE AND THE GRANT DATE. Personnel who on a Grant Determination Date are
eligible to be granted awards under the Plan on the applicable Grant Date
shall not be granted such awards on such Grant Date if they become ineligible
for any reason prior to or on such Grant Date.
B-3
<PAGE>
ARTICLE 6. STOCK OPTIONS
6.1 GRANT. On the initial Grant Date, the Company shall award Stock Options
covering 4,900,000 shares of Stock to the Participants, as specified in
Article 5. On each of the second and third Grant Dates, the Company shall
award Stock Options covering 4,900,000 shares of Stock to the Participants as
specified in Article 5, subject to increase as provided in Article 7.1. A
Participant's Stock Option will entitle him to purchase from the Company a
specified number of shares of Stock, at the Option Price. Unless the Committee
directs otherwise, the number of shares of Stock subject to a Stock Option
awarded to a Participant on a Grant Date shall be equal to the Annual Base
Salary of the Participant as of the applicable Grant Determination Date
divided by the total Annual Base Salary as of the applicable Grant
Determination Date for all Participants eligible to receive an award of Stock
Options on the applicable Grant Date, and multiplying that result by the total
number of shares of Stock subject to Stock Options available for award on that
Grant Date. Awards shall be rounded down to the nearest whole share of Stock
subject to a Stock Option.
6.2 NONTRANSFERABILITY. A Stock Option granted pursuant to the Plan shall
not be transferable by the Participant otherwise than by will, by the laws of
descent and distribution, or by a written designation referred to in Article
7.3 below, and is exercisable during the Participant's lifetime only by such
Participant.
6.3 OPTION PRICE. The Option Price for the first installment of Stock
Options shall be the Fair Market Value of the Stock on the initial Grant Date.
The Option Price for the second and third installments of Stock Options shall
be the Fair Market Value of the Stock on the second and third Grant Dates,
respectively. The Option Price shall be the price payable by the Participant
for a share of Stock upon the exercise of a Stock Option. The Option Price
shall be subject to adjustment in accordance with the provisions of Article
4.2 hereof.
6.4 OPTION EXERCISE DATES AND TERM. Subject to Article 7 hereof, a Stock
Option granted to a Participant shall become exercisable on the first
anniversary of its Grant Date, and the Stock Option shall expire on, and no
shares of Stock may be purchased thereunder on or after, the tenth anniversary
of its Grant Date.
6.5 EXERCISING STOCK OPTIONS. To exercise a Stock Option, the holder thereof
shall give irrevocable notice of the exercise to the Company or one or more
third parties designated by the Committee, identifying a whole number of
shares of Stock with respect to which such Stock Option is being exercised.
The Option Price for the Stock Options being exercised shall be paid in full
prior to issuance of the Stock. The Committee may, from time to time, in its
sole discretion, establish administrative procedures relating to the exercise
of Stock Options, provided that such procedures are consistent with the terms
of the Plan.
6.6 WITHHOLDING TAXES. The Participant shall be required to pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment of, the amount of any foreign, federal (including FICA), state, or
local taxes of any kind required by law to be withheld with respect to the
exercise of a Stock Option. Unless otherwise determined by the Committee, the
Company shall withhold from the shares of Stock issued to a Participant upon
exercise of a Stock Option a sufficient number of whole shares of Stock based
on the Fair Market Value of such Stock on the exercise date to cover amounts
which the Company is required by law to withhold with respect to the exercise
of a Stock Option.
6.7 PAYMENT. Payment of the Option Price and tax withholding obligation
shall be made by cashier's check, through electronic funds transfer or through
a broker-assisted Stock Option exercise pursuant to procedures the Committee
may, in its sole discretion, establish from time to time. No shares of Stock
shall be delivered to the Participant until such amounts have been paid. The
Participant shall be responsible for all brokerage commissions, interest and
other expenses, if any, in a broker-assisted Stock Option exercise.
ARTICLE 7. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH, DISABILITY, LEAVE OF
ABSENCE OR FURLOUGH
7.1 TERMINATION OR RESIGNATION. If a Participant's employment shall be
terminated by the Company for reasons other than Retirement, Death,
Disability, Leave of Absence or Furlough, or if a Participant resigns
B-4
<PAGE>
from employment with the Company, any unexercised Stock Option held by such
Participant shall be immediately forfeited. Such forfeited Stock Options shall
be allocated to Participants on the next ensuing Grant Date, if any.
7.2 RETIREMENT, DISABILITY, LEAVE OF ABSENCE OR FURLOUGH.
A Participant who is Retired, or is on Disability, Leave of Absence or
Furlough, shall be entitled to exercise any Stock Option awarded to him to the
same extent as a Participant who remains in active employment with the
Company, except that the exercise period for a Participant who is placed on
Furlough shall be the earlier of the remainder of the Exercise Period or the
date he terminates from Delta and forfeits his recall rights.
7.3 DEATH.
In the event of the death of a Participant while employed by the Company,
such Participant's Stock Options may be exercised on his behalf, to the same
extent as a Participant who remains in active employment with the Company, by
the person or persons named in a written designation by the Participant
delivered to a party designated by the Committee or, if there is no such
designation, by the executor or administrator of the Participant's estate or
such other personal representative, legatee or devisee as may be designated in
the Participant's last will and testament; provided, that such exercise must
otherwise comply with the Plan and the applicable Stock Option award.
ARTICLE 8. AMENDMENTS AND TERMINATION
The Board or the Committee may amend, alter, or discontinue the Plan, at any
time at its sole discretion, but no amendment, alteration, or discontinuation
shall be made which would impair the rights of a Participant under a Stock
Option theretofore granted, without the Participant's consent.
The Board and the Committee shall each have complete discretion to determine
whether or not to make awards of Stock Options to Company personnel who are
employed outside the United States or to make awards on terms and conditions
different from those specified in the Plan, and to amend the Plan or any
procedures adopted by the Committee under the Plan as the Board or the
Committee may deem necessary or advisable.
ARTICLE 9. MISCELLANEOUS
9.1 GOVERNING LAW. The Plan, and all awards and agreements made hereunder,
shall be governed by and construed in accordance with the laws of the State of
Georgia without giving effect to the principles of conflicts of laws thereof.
9.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular; and the singular shall include the plural.
9.3 NO RIGHT TO EMPLOYMENT. The adoption of the Plan shall not confer upon
any employee of the Company any right to continued employment with the
Company, nor shall it interfere in any way with the right of the Company to
terminate the employment of any of its employees at any time.
9.4 RIGHTS OF PARTICIPANTS. Nothing in the Plan or in any Stock Option
granted under the Plan shall confer upon any Participant or his executors,
administrators or legal representatives any of the rights of a
B-5
<PAGE>
stockholder of the Company with respect to the shares of Stock subject to a
Stock Option until certificates for such shares shall have been issued upon
the exercise of such Stock Option.
9.5 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
9.6 PURCHASE FOR INVESTMENT AND LEGALITY. The Participant, by acceptance of
any Stock Option granted under the Plan, shall represent and warrant to the
Company that the purchase or receipt of shares of Stock upon the exercise
thereof shall be for investment and not with a view to distribution, provided
that such representation and warranty shall be inoperative if, in the opinion
of counsel to the Company, a proposed sale or distribution of such shares of
Stock is pursuant to an applicable effective registration statement under the
Securities Act of 1933 or is, without such representation and warranty, exempt
from registration under such Act. The Company shall file a Registration
Statement on Form S-8 pursuant to the Securities Act of 1933, as amended,
covering the Stock to be offered pursuant to the Plan and will use its best
efforts to maintain such registration at all times necessary to permit holders
of Stock Options to exercise them.
The obligation of the Company to issue shares of Stock upon the exercise of
a Stock Option shall also be subject as conditions precedent to compliance
with applicable provisions of the Securities Act of 1933, the Securities
Exchange Act of 1934, state and foreign securities laws, rules and regulations
under any of the foregoing, and applicable requirements of any securities
exchange upon which the Company's securities shall be listed.
The Company may endorse an appropriate legend referring to the foregoing
restrictions upon the certificate or certificates representing any shares of
Stock issued or transferred to a Participant upon the exercise of any Stock
Option granted under the Plan.
ARTICLE 10. EFFECTIVE DATE OF PLAN
The Plan shall be effective when it and the Pilots Stock Option Plan are
approved as a single proposal at the Company's 1996 Annual Meeting of
Stockholders, or any adjournments thereof, by a majority of the votes entitled
to be cast by the holders of all shares of Stock and the Company's Series B
ESOP Convertible Preferred Stock, voting together as a single class, that are
represented at the meeting and entitled to vote, provided that the total votes
cast on such proposal must represent over 50% in interest of all securities
entitled to vote on such proposal.
ARTICLE 11. CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Stock Options not
yet granted on the date of such Change in Control will be granted, pursuant to
Articles 5 and 6 hereof, on the date of such Change in Control at an Option
Price equal to the Fair Market Value of the Stock on such date. "Change in
Control" for this purpose shall have the meaning ascribed to it in Article 8.7
of the Pilots Stock Option Plan for pilot personnel of the Company as in
effect on the date specified in Article 10 hereof.
B-6
<PAGE>
APPENDIX C
DELTA AIR LINES, INC.
PILOTS STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT
Delta Air Lines, Inc., a Delaware corporation (the "Company"), and the Air
Line Pilots Association, International, as representative of the Pilots of
Delta Air Lines, Inc. (the "Association"), hereby establish the "Pilots Stock
Option Plan" (the "Plan"), as set forth herein. The Plan provides for the
grant of Stock Options to purchase a total of 10 million shares of Stock. The
Stock Options will be granted in three separate installments of equal size.
The Plan shall be part of the Delta Pilots Agreement, shall become effective
as of the Effective Date of such Agreement and shall run concurrently with the
Duration Clause of such Agreement and subject to any status quo period
thereafter.
ARTICLE 2. DEFINITIONS
For the purposes of the Plan, the following terms shall be defined as set
forth below and, when the defined meaning is intended, the term is
capitalized.
2.1 "ASSOCIATION" means the Air Line Pilots Association, International.
2.2 "BOARD" OR "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.3 "COMMITTEE" means the Committee referred to in Article 3 of the Plan. If
at any time no Committee shall be designated, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
2.4 "COMPANY" means Delta Air Lines, Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.
2.5 "DELTA PILOTS AGREEMENT" means the basic collective bargaining agreement
together with all effective amendments, supplemental agreements, letters of
agreement and letters of understanding between the Company and the
Association, in existence on the effective date of the Plan and as may be
modified or supplemented after this date.
2.6 "DISABILITY" means disability as determined under the Delta Pilots
Disability and Survivorship Plan.
2.7 "EXERCISE PERIOD" means the period of time between the date a Stock
Option becomes exercisable and the tenth anniversary of that Stock Option's
Grant Date, when the Stock Option expires.
2.8 "FAIR MARKET VALUE" means, as of any given date, the opening price of
the Stock on the New York Stock Exchange or, if no sale of Stock occurs on the
New York Stock Exchange on such date, the opening price of the Stock on the
New York Stock Exchange on the last preceding day on which such sale occurred.
2.9 "FURLOUGH" means removal from the Company's service due to a reduction
in force.
2.10 "GRANT DATE" means the date on which each installment of Stock Options
is awarded under the Plan. The initial Grant Date shall be the date agreed
upon by the Company and Association, which date shall be
C-1
<PAGE>
within 30 days after the later of (a) the date the new Delta Pilots Agreement
becomes effective following its ratification and signing; (b) the date the
Plan is approved by the Board of Directors and, if required, the stockholders
of the Company; or (c) the date of determination of each Participant, and the
number of shares of Stock subject to Stock Options each Participant will
receive, on the initial Grant Date under the Plan. The second Grant Date shall
be the first anniversary of the initial Grant Date. The third Grant Date shall
be the second anniversary of the initial Grant Date.
2.11 "LEAVE OF ABSENCE" means Company approved absence from the Company's
service without pay for personal reasons.
2.12 "OPTION PRICE" means the price at which a share of Stock covered by a
Stock Option may be purchased, as specified in Article 6 below.
2.13 "PARTICIPANT" means a Pilot who is a recipient of an award of a Stock
Option under the Plan.
2.14 "PILOT" means an employee of the Company whose name appears on the
Delta Air Lines Pilots' System Seniority List on the initial Grant Date or any
Grant Date thereafter.
2.15 "PLAN" means the Pilots Stock Option Plan.
2.16 "RETIREMENT" means that a Pilot has left the Company's service and is
eligible for a benefit under the Delta Pilots Retirement Plan (or any
successor thereto) other than a Termination Benefit (as that term is defined
under the Delta Pilots Retirement Plan or any successor thereto).
2.17 "STOCK" means the Common Stock, $3.00 par value, of the Company.
2.18 "STOCK OPTION" means the option to purchase shares of Stock granted
pursuant to Article 6 below. All Stock Options granted pursuant to the Plan
shall be deemed "non-qualified" for purposes of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time, and any successor thereto.
ARTICLE 3. ADMINISTRATION
3.1 THE ADMINISTRATOR. The Plan shall be administered by the Personnel,
Compensation & Nominating Committee of the Board of Directors, or such other
committee of the Board as may be designated by the Board from time to time.
Each director, while serving as a member of the Committee, shall be considered
to be acting in his capacity as a director of the Company. Members of the
Committee shall be appointed from time to time for such terms as the Board
shall determine, and may be removed by the Board at any time with or without
cause.
3.2 THE COMMITTEE'S AUTHORITY. The Committee shall have full authority to
construe and interpret the Plan, to establish, amend and rescind appropriate
rules and regulations relating to the Plan, to administer the Plan, and to
take all such steps and make all such determinations in connection with the
Plan and the Stock Options granted thereunder as it may deem necessary or
advisable to carry out the provisions and intent of the Plan, provided that
any decision, determination or action of the Committee with respect to the
Plan shall be consistent with the terms of the Plan. All determinations of the
Committee shall be by a majority of its members and, subject to Article 3.3,
the Committee's determinations if consistent with the terms of the Plan shall
be final and conclusive for all purposes and upon all persons. The Committee
may delegate its authority hereunder.
C-2
<PAGE>
3.3 DISPUTE RESOLUTION. Disputes arising out of decisions, determinations or
other actions of the Committee with respect to the interpretation,
administration or application of the Plan shall be subject to the grievance
and System Board procedures of the Delta Pilots Agreement.
ARTICLE 4. STOCK SUBJECT TO PLAN
4.1 STOCK RESERVED. The total number of shares of Stock reserved and
available for distribution under the Plan shall be 10 million, subject to
adjustment as provided in Article 4.2. Stock issued under the Plan may be
either authorized and unissued shares or treasury shares.
4.2 CERTAIN CHANGES IN CORPORATE STRUCTURE. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, Stock split
or other change in corporate structure affecting the Stock, the Committee, in
its sole discretion, shall make such adjustments as it deems necessary to
reflect such change so as to prevent the diminution or enlargement of a
Participant's rights, including but not limited to, adjustments in the
aggregate number of shares of Stock reserved for issuance under the Plan, and
adjustments in the Option Price, provided that the number of shares of Stock
subject to any award shall always be a whole number. If any of the foregoing
events occur affecting the Stock and there is an adjustment to the then
outstanding non-qualified stock options under the last paragraph of Section 3
of the Company's 1989 Stock Incentive Plan (or the corresponding provision of
any successor plan) for officers and key employees, the Stock Options under
the Plan shall be adjusted in a manner no less favorable to the Participant
than the adjustment for the then outstanding non-qualified stock options under
the last paragraph of Section 3 of the Company's 1989 Stock Incentive Plan (or
the corresponding provision of any successor plan).
ARTICLE 5. ELIGIBILITY
Subject to the approval of the Company, the Association will determine the
Participants and the number of whole shares of Stock subject to Stock Options
to be awarded to each Participant on each Grant Date.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT. On the initial Grant Date, the Company shall award Stock Options
covering 3,333,334 shares of Stock to the Participants, as specified in
Article 5. On each of the second and third Grant Dates, the Company shall
award Stock Options covering 3,333,333 shares of Stock to the Participants as
specified in Article 5. A Participant's Stock Option will entitle him to
purchase from the Company a specified number of shares of Stock, at the Option
Price.
6.2 NONTRANSFERABILITY. A Stock Option granted pursuant to the Plan shall
not be transferable by the Participant otherwise than by will, by the laws of
descent and distribution, or by a written designation referred to in Article
7.3 below, and is exercisable during the Participant's lifetime only by such
Participant.
6.3 OPTION PRICE. The Option Price for the first installment of Stock
Options shall be the Fair Market Value of the Stock on the initial Grant Date.
The Option Price for the second and third installments of Stock Options shall
be the Fair Market Value of the Stock on the second and third Grant Dates,
respectively. The Option Price shall be the price payable by the Participant
for a share of Stock upon the exercise of a Stock Option. The Option Price
shall be subject to adjustment in accordance with the provisions of Article
4.2 hereof.
6.4 OPTION EXERCISE DATES AND TERM. Subject to Article 7 hereof, a Stock
Option granted to a Participant shall become exercisable on the first
anniversary of its Grant Date, and the Stock Option shall expire on, and no
shares of Stock may be purchased thereunder on or after, the tenth anniversary
of its Grant Date.
C-3
<PAGE>
6.5 EXERCISING STOCK OPTIONS. To exercise a Stock Option, the holder thereof
shall give irrevocable notice of the exercise to the Company or one or more
third parties designated by the Committee, identifying a whole number of
shares of Stock (which shall not be less than the lesser of (a) 50 shares of
Stock or (b) the number of shares of Stock subject to such Participant's then
exercisable Stock Option) with respect to which such Stock Option is being
exercised. The Option Price for the Stock Options being exercised shall be
paid in full prior to issuance of the Stock. The Committee may, from time to
time, in its sole discretion, and after consultation with the Association,
establish administrative procedures relating to the exercise of Stock Options,
provided that such procedures are consistent with the terms of the Plan.
6.6 WITHHOLDING TAXES. The Participant shall be required to pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment of, the amount of any foreign, federal (including FICA), state, or
local taxes of any kind required by law to be withheld with respect to the
exercise of a Stock Option.
6.7 PAYMENT. Payment of the Option Price and tax withholding obligation
shall be made by cashier's check, through electronic funds transfer or through
a broker-assisted Stock Option exercise pursuant to procedures the Committee
may, in its sole discretion, establish from time to time. No shares of Stock
shall be delivered to the Participant until all such amounts have been paid.
The Participant shall be responsible for all brokerage commissions, interest
and other expenses, if any, in a broker-assisted Stock Option exercise.
ARTICLE 7. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH, DISABILITY AND LEAVE
OF ABSENCE
7.1 TERMINATION OR RESIGNATION. If a Participant's employment shall be
terminated by the Company, or if a Participant resigns from employment with
the Company, any unexercised Stock Option held by such Participant shall be
immediately forfeited. Such forfeited Stock Options shall be allocated to
Participants on the next ensuing Grant Date, if any.
7.2 RETIREMENT, DISABILITY, LEAVE OF ABSENCE OR FURLOUGH. A Participant who
is Retired, or is on Disability, Leave of Absence or Furlough, shall be
entitled to exercise any Stock Option awarded to him to the same extent as a
Participant who remains in active employment with the Company.
7.3 DEATH. In the event of the death of a Participant while employed by the
Company, the estate of such Participant, or other person designated by the
Participant, shall be entitled to exercise any Stock Option awarded to the
Participant to the same extent as a Participant who remains in active
employment with the Company.
ARTICLE 8. MISCELLANEOUS
8.1 GOVERNING LAW. The Plan, and all awards and agreements made hereunder,
shall be governed by and construed in accordance with the Railway Labor Act,
and of the laws of the State of Georgia without giving effect to the
principles of conflicts of laws thereof.
8.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular; and the singular shall include the plural.
8.3 NO RIGHT TO EMPLOYMENT. The adoption of the Plan shall not confer upon
any employee of the Company any right to continued employment with the
Company, nor shall it interfere in any way with the right of the Company to
terminate the employment of any of its employees at any time.
C-4
<PAGE>
8.4 RIGHTS OF PARTICIPANTS. Nothing in the Plan or in any Stock Option
granted under the Plan shall confer upon any Participant or his executors,
administrators or legal representatives any of the rights of a stockholder of
the Company with respect to the shares of Stock subject to a Stock Option
until certificates for such shares shall have been issued upon the exercise of
such Stock Option.
8.5 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
8.6 PURCHASE FOR INVESTMENT AND LEGALITY. The Participant, by acceptance of
any Stock Option granted under the Plan, shall represent and warrant to the
Company that the purchase or receipt of shares of Stock upon the exercise
thereof shall be for investment and not with a view to distribution, provided
that such representation and warranty shall be inoperative if, in the opinion
of counsel to the Company, a proposed sale or distribution of such shares of
Stock is pursuant to an applicable effective registration statement under the
Securities Act of 1933 or is, without such representation and warranty, exempt
from registration under such Act. The Company shall file a Registration
Statement on Form S-8 pursuant to the Securities Act of 1933, as amended,
covering the Stock to be offered pursuant to the Plan and will use its best
efforts to maintain such registration at all times necessary to permit holders
of Stock Options to exercise them.
The obligation of the Company to issue shares of Stock upon the exercise of
a Stock Option shall also be subject as conditions precedent to compliance
with applicable provisions of the Securities Act of 1933, the Securities
Exchange Act of 1934, state securities laws, rules and regulations under any
of the foregoing and applicable requirements of any securities exchange upon
which the Company's securities shall be listed. The Company shall use its
reasonable best efforts to take all actions necessary and appropriate to
satisfy each of the foregoing conditions.
The Company may endorse an appropriate legend referring to the foregoing
restrictions upon the certificate or certificates representing any shares of
Stock issued or transferred to a Participant upon the exercise of any Stock
Option granted under the Plan.
8.7 CHANGE IN CONTROL PROVISIONS. In the event of a Change in Control of the
Company (as described in Section 1.B.5. and G.1., 2., and 3. of the Delta
Pilots Agreement) all Stock Options not yet granted on the date of such Change
in Control will be granted, pursuant to Article 5, on the date of such Change
in Control at an Option Price equal to the Fair Market Value of the Stock on
such date.
C-5
<PAGE>
[LOGO OF DELTA AIR LINES]
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 24, 1996, OR ANY
ADJOURNMENTS THEREOF. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
R DIRECTED BY THE STOCKHOLDER(S). The undersigned hereby appoints Ronald
W. Allen, Mary Johnston Evans and Jesse Hill, Jr., jointly and severally
with full power of substitution to each, or, instead of any of
O them,____________________________________, as proxies for and on behalf
of the undersigned, to attend the Annual Meeting of Stockholders of
Delta Air Lines, Inc., to be held at the Holiday Inn Professional
X Centre/Atrium, 2001 Louisville Avenue, Monroe, Louisiana, on Thursday,
October 24, 1996, at 9:00 a.m., local time, or any adjournments
thereof, and to vote as directed below all stock of this Company which
Y the undersigned would be entitled to vote if personally present. BY
ACCEPTANCE, THE PROXIES NAMED ABOVE AGREE THAT THIS PROXY WILL BE VOTED
IN THE MANNER DIRECTED BY THE STOCKHOLDER GIVING THIS PROXY. IF NO
DIRECTIONS ARE SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF
ALL 12 NOMINEES FOR DIRECTOR, FOR THE RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR FISCAL YEAR 1997, FOR
THE APPROVAL OF THE MATERIAL TERMS OF THE INCENTIVE COMPENSATION PLAN,
FOR THE APPROVAL OF THE DELTASHARE STOCK OPTION PLAN AND THE PILOTS
STOCK OPTION PLAN, AND AGAINST PROPOSALS 5 AND 6, ALL AS SET FORTH ON
THE REVERSE. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
THEREOF, AS SET OUT IN THE PROXY STATEMENT DATED SEPTEMBER 16, 1996,
RECEIPT OF WHICH IS ACKNOWLEDGED. THIS PROXY, IF PROPERLY EXECUTED AND
DELIVERED, WILL REVOKE ALL PRIOR PROXIES.
NOMINEES FOR DIRECTOR:
Ronald W. Allen, Edwin L. Artzt, Henry A. Biedenharn, III, James L.
Broadhead, Edward H. Budd, George D. Busbee, R. Eugene Cartledge, Mary
Johnston Evans, Gerald Grinstein, Jesse Hill, Jr., Peter D. Sutherland
and Andrew J. Young.
- --------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD
CONDUCT OF MEETING
In fairness to all stockholders attending the Annual Meeting of Stockholders and
in the interest of an orderly and constructive meeting, the following procedures
will apply:
1. Proposals will be presented in the order in which they appear in the Proxy
Statement. Presentations by proponents and supporters of qualified
stockholder proposals may not exceed a total of five minutes. Questions
about any proposal under consideration should be limited to two minutes.
2. Questions or comments concerning any issue raised during the general
stockholder question and comment period should be relevant to matters of
interest to stockholders and will be limited to three minutes.
3. The use of cameras, sound recording equipment, communication devices, or any
other similar equipment is prohibited without Delta's prior permission.
<PAGE>
[x] Please mark your | 0299
votes as in this -------
example.
The Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
FOR all nominees, FOR Proposals 2, 3 and 4, and AGAINST Proposals 5 and 6.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------- ------------------------------------------------
The Board of Directors recommends a vote FOR all nominees and FOR The Board of Directors recommends
Proposals 2, 3 and 4. a vote AGAINST Proposals 5 and 6.
- ------------------------------------------------------------------------------- ------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of FOR WITHHOLD 2. PROPOSAL to ratify the FOR AGAINST ABSTAIN 5. PROPOSAL by a stock- FOR AGAINST ABSTAIN
Directors. appointment of Arthur [ ] [ ] [ ] holder relating [ ] [ ] [ ]
(see reverse) [ ] [ ] Andersen LLP as to political
independent auditors activities.
for fiscal year
Withhold authority to vote 1997. 6. PROPOSAL by a stock-
for the following nominee(s) holder relating to [ ] [ ] [ ]
only: 3. PROPOSAL to approve the employment matters.
material terms of the [ ] [ ] [ ]
- ---------------------------- Incentive Compensation
Plan.
4. PROPOSAL to approve the I plan to attend [ ]
DeltaShare Stock Option [ ] [ ] [ ] the Annual Meeting
Plan and the Pilots of Stockolders
Stock Option Plan.
</TABLE>
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Please sign EXACTLY as your name(s) appears hereon. When signing as
administrator, attorney, executor, guardian or trustee, please give your full
title. If the signer is a corporation or partnership, please sign full corporate
or partnership name by duly authorized officer or person. If shares are held
jointly, each joint owner should sign.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD
DELTA AIR LINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 24, 1996, 9:00 A.M.
HOLIDAY INN PROFESSIONAL CENTRE/ATRIUM
2001 LOUISVILLE AVENUE
MONROE, LOUISIANA 71201
<PAGE>
[LOGO OF DELTA AIR LINES]
INTERNAL MEMORANDUM
DATE: September 16, 1996
TO: Delta Family-Care Savings Plan Participants
FROM: Chairman of the Board, President and Chief Executive Officer
SUBJECT: DELTA'S 1996 ANNUAL MEETING OF STOCKHOLDERS
Enclosed are the 1996 Notice of Annual Meeting of Stockholders, Proxy Statement
and Annual Report to Stockholders. As trustee for the Delta Family-Care Savings
Plan, Fidelity Management Trust Company is providing the attached Voting
Instruction Form for the shares of Delta Common Stock and Series B ESOP
Convertible Preferred Stock attributable to your Savings Plan account.
Under the Savings Plan, you have the confidential right to instruct the trustee
how to vote these shares at the Annual Meeting, and we strongly encourage you to
do so. This may be done by completing and signing the Voting Instruction Form
and returning it to the trustee in the envelope provided. Every vote is
important.
Delta's Board of Directors recommends a vote "FOR" all nominees, "FOR" Proposals
2, 3 and 4, and "AGAINST" Proposals 5 and 6, as set forth in the Proxy
Statement.
Attendance at the annual Meeting will be limited to stockholders, those holding
proxies from stockholders and representatives of the news media. If you plan to
attend the Annual Meeting, please mark the appropriate box on the Voting
Instruction Form.
/s/ Ron
-----------------------------------
Ronald W. Allen
DETACH AND RETURN VOTING INSTRUCTION FORM
[ ] Please vote by FILLING IN the appropriate 1996
boxes below, as shown, using blue or black
ink or dark pencil. Do not use red ink.
DELTA FAMILY-CARE SAVINGS PLAN
VOTING INSTRUCTION FORM
FOR ALL WITHHOLD
_________________________________________________ nominees AUTHORITY
| Delta's Board of Directors recommends a vote | (except as to vote for all
| FOR all nominees and FOR Proposals 2, 3 and 4. | indicated nominees listed
_________________________________________________ below). below.
[ ] [ ]
1. Election of Directors.
NOMINEE FOR DIRECTOR:
Ronald W. Allen, Edwin L. Artzt, Henry A. Biedenharn, III, James L. Broadhead,
Edward H. Budd, George D. Busbee, R. Eugene Cartledge, Mary Johnston Evans,
Gerald Grinstein, Jesse Hill, Jr., Peter D. Sutherland and Andrew J. Young.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ---------------------------------------------------- FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of Arthur
Andersen LLP as independent auditors for fiscal [ ] [ ] [ ]
year 1997.
3. PROPOSAL to approve the material terms of the [ ] [ ] [ ]
Incentive Compensation Plan.
4. PROPOSAL to approve the DeltaShare Stock Option [ ] [ ] [ ]
Plan and the Pilots Stock Option Plan.
___________________________________________________
| Delta's Board of Directors recommends a vote |
| AGAINST Proposals 5 and 6. |
___________________________________________________
5. PROPOSAL by a stockholder relating to political [ ] [ ] [ ]
activities.
6. PROPOSAL by a stockholder relating to employment [ ] [ ] [ ]
matters.
__________________________________________________________
| I plan to attend the Annual Meeting of Stockholders. [ ]|
__________________________________________________________
<PAGE>
DELTA AIR LINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 24, 1996, 9:00 A.M.
HOLIDAY INN PROFESSIONAL CENTRE/ATRIUM
2001 LOUISVILLE AVENUE
MONROE, LOUISIANA 71201
CONDUCT OF MEETING
In fairness to all stockholders attending the 1996 Annual Meeting of
Stockholders and in the interest of an orderly and constructive meeting, the
following procedures will apply:
1. Proposals will be presented in the order in which they appear in the Proxy
Statement. Presentations by proponents and supporters of qualified
stockholder proposals may not exceed a total of five minutes. Questions
about any proposal under consideration should be limited to two minutes.
2. Questions or comments concerning any issue raised during the general
stockholder question and comment period should be relevant to matters of
interest to stockholders and will be limited to three minutes.
3. The use of cameras, sound recording equipment, communication devices, or any
other similar equipment is prohibited without Delta's prior permission.
DETACH AND RETURN VOTING INSTRUCTION FORM
DELTA FAMILY-CARE SAVINGS PLAN 1996
VOTING INSTRUCTION FORM
THIS VOTING INSTRUCTION FORM IS PROVIDED BY FIDELITY MANAGEMENT TRUST COMPANY,
AS TRUSTEE FOR THE DELTA FAMILY-CARE SAVINGS PLAN, for the Annual Meeting of
Stockholders. The shares of Delta Stock attributable to your Saving Plan
account will be voted as you direct. If no directions are specified, shares
attributable to your account will be voted in accordance with the terms of the
Savings Plan.
Pursuant to the Savings Plan, I instruct the Savings Plan Trustee to vote the
shares of Series B ESOP Convertible Preferred Stock and Common Stock of Delta
attributable to my Savings Plan account at the Annual Meeting of Stockholders of
Delta Air Lines, Inc. to be held at the Holiday Inn Professional Centre/Atrium,
2001 Louisville Avenue, Monroe, Louisiana, on Thursday, October 24, 1996, at
9:00 a.m., local time, or any adjournments thereof, as indicated on the reverse
of this form.
This instruction, if properly executed and delivered, will revoke all prior
instructions. I hereby acknowledge receipt of Delta's Proxy Statement dated
September 16, 1996.
Please sign EXACTLY as your name(s)
appears hereon. When signing as
administrator, attorney, executor,
guardian or trustee, please give your
full title.
PLEASE DATE, SIGN AND MAIL THIS INSTRUCTION
FORM IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
Date:____________________________, 1996
[ ]
Signature(s)
