<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
DELTA AIR LINES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[DELTA AIRLINES LOGO]
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the 1997 Annual Meeting of Stockholders of Delta Air Lines, Inc.
As stated 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 23, 1997, 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 1997. 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. Suzanne Rolon, 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/ GERALD GRINSTEIN
Gerald Grinstein
Chairman of the Board
/s/ LEO F. MULLIN
Leo F. Mullin
President and Chief Executive Officer
Atlanta, Georgia
September 15, 1997
<PAGE> 3
[DELTA AIRLINES LOGO]
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 23, 1997, 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 1998.
3. The approval of the 1989 Stock Incentive Plan, as amended, as
described in the attached proxy statement.
4. The stockholder proposal described in the attached proxy statement
relating to the location of future Annual Meetings of Stockholders,
if the proposal is presented at the meeting.
5. The stockholder proposal described in the attached proxy statement
relating to employment matters, if the proposal is presented at the
meeting.
6. Such other matters as may properly come before the meeting or any
adjournments thereof.
The close of business on August 29, 1997, 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
and Secretary
Atlanta, Georgia
September 15, 1997
<PAGE> 4
DELTA AIR LINES, INC.
GENERAL OFFICES/HARTSFIELD ATLANTA INTERNATIONAL AIRPORT
POST OFFICE BOX 20706
ATLANTA, GEORGIA 30320-6001
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 23, 1997
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 23, 1997, 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 15, 1997.
The cost of this solicitation will be borne by Delta. 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. Delta 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 29, 1997, 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 73,722,230 shares of common
stock, par value $3 per share ("Common Stock"), and 6,654,686 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
<PAGE> 5
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.
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 1998; (3) "FOR" the approval of the 1989 Stock
Incentive Plan, as amended, as described herein; (4) "AGAINST" the stockholder
proposal described herein relating to the location of future Annual Meetings of
Stockholders; and (5) "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
1989 Stock Incentive Plan, as amended, as 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; (4) to approve the stockholder
proposal described herein relating to the location of future Annual Meetings of
Stockholders; and (5) 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
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<PAGE> 6
meetings are scheduled when required. The Board held four regular meetings and
eight special meetings in fiscal 1997.
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.
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 1997.
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 three times in
fiscal 1997.
The Corporate Governance Committee, which was established in August 1997,
is charged with promoting effective and responsive governance of the Company.
The Committee will review and make recommendations to the Board of Directors
concerning its composition, organization and processes; the type, function, size
and membership of Board committees; qualifications and eligibility requirements
for Board members; evaluation of the Board; Board compensation; and other
corporate governance issues. These recommendations may include the adoption of
principles, procedures, policies, or operational methods with respect to the
corporate governance of the Company generally, including the holding of
regularly scheduled meetings of non-employee directors only. The Committee
consists of four non-employee directors.
The Corporate Governance Committee will also recommend 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.
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings. The Committee, which consists of the President and Chief
Executive Officer and five non-employee directors, did not meet in fiscal 1997.
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 six times in
fiscal 1997.
The Personnel, Compensation & Nominating Committee, which was renamed the
Personnel & Compensation Committee as a result of the establishment of the
Corporate Governance Committee, will continue to review and make recommendations
to the Board concerning the election of the Company's officers, the compensation
for and evaluation of the Chief Executive Officer, management succession
planning and the overall policy of the Company's benefit plans for non-executive
personnel. It also sets the salaries for all officers above the level of Senior
Vice President except the Chief Executive Officer, and administers the Incentive
Compensation and 1989 Stock Incentive Plans. Certain functions of the former
Personnel, Compensation & Nominating Committee, including the recommendation to
the Board of candidates for election as directors and the consideration of
nominees recommended by stockholders, are now the responsibility of the
Corporate Governance Committee. The Personnel & Compensation Committee consists
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<PAGE> 7
of four non-employee directors. The Personnel, Compensation & Nominating
Committee met four times in fiscal 1997.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors (i.e., directors who are not
employed by the Company on a full-time basis) receive an annual retainer of
$25,000, $5,000 of which is paid in shares of Common Stock, and a meeting fee of
$1,000 plus expenses for each Board and Committee meeting attended. The
Chairpersons of the Audit, Benefit Funds Investment, Corporate Governance,
Executive, Finance and Personnel & Compensation Committees also receive an
annual fee of $7,500.
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 defer all or any part of their cash 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, 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). With respect to amounts deferred prior
to October 26, 1995, the Company will continue to pay interest 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 served on the Board on or before October 24, 1996, and 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.
On October 24, 1996, the Board terminated the Advisory Director Program for
all future directors who were not members of the Board on that date.
Non-employee directors who join the Board after October 24, 1996, will receive,
in addition to their other fees, a deferred payment of $6,300 during each year
in which they serve as a director. The deferred payment will earn an investment
return equivalent to the investment return on the Delta Common Stock Fund under
the Delta Family-Care Savings Plan, and will be paid to the director after he
discontinues his service as a member of the Board.
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.
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<PAGE> 8
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of ten 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:
Edwin L. Artzt, Henry A. Biedenharn, III, James L. Broadhead, Edward H.
Budd, R. Eugene Cartledge, Mary Johnston Evans, Gerald Grinstein, Jesse
Hill, Jr., Leo F. Mullin and Andrew J. Young.
All of the nominees were elected by the stockholders at the last Annual
Meeting except Mr. Mullin. Effective August 14, 1997, the Board elected Mr.
Mullin as a director and as President and Chief Executive Officer of the
Company.
During fiscal 1997, each nominee attended at least 75% of the meetings of
the Board of Directors and the Committees on which he or she served except Mr.
Young, who attended 73% of such meetings.
Effective July 31, 1997, Mr. Ronald W. Allen retired as the Company's
Chairman of the Board, President and Chief Executive Officer, and resigned from
the Board of Directors. Mr. Allen has been elected an advisory director.
The Company's By-Laws establish mandatory retirement ages for directors.
Pursuant to these provisions, Mr. George D. Busbee will retire from the Board of
Directors on October 23, 1997.
Mr. Peter D. Sutherland has decided not to stand for re-election to the
Board of Directors due to his extensive commitments as Chairman and Managing
Director of Goldman Sachs International, and as a general partner of The Goldman
Sachs Group, L.P. and Goldman, Sachs & Co., and his recent election as
non-executive Chairman of The British Petroleum Company plc.
The members of the Board of Directors provide the Company with a wide and
valuable range of judgment and experience from such diverse fields as air and
ground transportation, consumer products, government and international affairs,
insurance, international trade, law, utilities, and paper and paperboard
production.
Certain information about the nominees follows:
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) and
GTE Corporation, and a member of The Business Council. Age 67.
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
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<PAGE> 9
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 55.
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,
the Corporate Governance Committee and the Personnel & Compensation 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
61.
EDWARD H. BUDD 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 The Travelers Group, Inc. and GTE Corporation, a member of
the American Academy of Actuaries and The Business Council, and a Trustee of
Tufts University. Age 64.
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 Committee. He is also a director of Blount,
Inc., Chase Brass Industries, Inc., Sun Company, Inc., UCAR International Inc.
and Union Camp Corporation. Age 68.
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, is Chairman of the
Corporate Governance Committee and the Executive Committee, and is a member of
the Audit Committee and the Personnel & Compensation Committee. She served as
non-executive Acting Chairman of the Company's Board of Directors from August 1,
1997 to August 14, 1997. 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
67.
GERALD GRINSTEIN was elected non-executive Chairman of the Company's Board
of Directors effective August 14, 1997. Mr. 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 Committee, and is
a member of the Corporate Governance Committee, the Executive
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Committee and the Finance Committee. He is also a director of Browning-Ferris
Industries, Inc., Imperial Holly Corporation, PACCAR Inc. and Sundstrand
Corporation. Age 65.
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,
Inc. Age 71.
LEO F. MULLIN was elected President and Chief Executive Officer of Delta
effective August 14, 1997. Mr. Mullin was Vice Chairman of Unicom Corporation
and its principal subsidiary, Commonwealth Edison Company, from 1995 to August
13, 1997. He was an executive of First Chicago Corporation from 1981 to 1995,
serving as that company's President and Chief Operating Officer from 1993 to
1995, and as Chairman and Chief Executive Officer of American National Bank, a
subsidiary of First Chicago Corporation, from 1991 to 1993. He has been a
director of Delta since August 14, 1997, and is a member of the Executive
Committee. Mr. Mullin is also a director of Inland Steel Industries, Inc. and
Pittway Corporation. Mr. Mullin serves on the Board of Trustees (former
Chairman) of the Field Museum of Natural History, is Vice Chairman of the
Chicago Urban League and is a member of the board of Northwestern University.
Age 54.
ANDREW J. YOUNG has been Co-Chairman and a senior partner of GoodWorks
International, Inc. since January 1997. He was Vice Chairman of Law Companies
Group, Inc. from 1993 through January 1997, and a director of that company from
August 1995 through January 1997. 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 and the Corporate Governance Committee. Mr. Young is a
director of Archer Daniels Midland Company, Cox Communications, Inc., Film
Fabricators, Inc., Host Marriott Corporation, The Argus Board (The International
Advisory Board of Independent Newspapers Holdings Limited) and Thomas Nelson,
Inc. He is Chairman of the Southern Africa Enterprise Development Fund, a member
of the Georgia Tech Advisory Board, and a director of the Martin Luther King,
Jr. Center. He was Co-Chairman of the Atlanta Committee for the Olympic Games
and a member of the Board of the United States Olympic Committee. Mr. Young also
served as the 1996 Chairman of the Greater Atlanta Chamber of Commerce. Age 65.
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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 29, 1997, 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
NAME OF BENEFICIAL OWNER TITLE OF SECURITIES OWNED(1)
- ------------------------ -------------------- ------------
<S> <C> <C>
DIRECTORS
Edwin L. Artzt....................................... Common Stock 1,071
Henry A. Biedenharn, III............................. Common Stock 20,858(2)(3)
James L. Broadhead................................... Common Stock 1,071
Edward H. Budd....................................... Common Stock 3,151(3)
George D. Busbee..................................... Common Stock 170
R. Eugene Cartledge.................................. Common Stock 1,276
Mary Johnston Evans.................................. Common Stock 1,497(3)
Gerald Grinstein..................................... Common Stock 2,392(3)
Jesse Hill, Jr....................................... Common Stock 1,540(4)
Leo F. Mullin........................................ Common Stock 6,000
Peter D. Sutherland.................................. Common Stock 261(5)
Andrew J. Young...................................... Common Stock 319
EXECUTIVE OFFICERS
Ronald W. Allen...................................... Common Stock 291,037(6)(7)
ESOP Preferred Stock 108
Maurice W. Worth..................................... Common Stock 13,844
ESOP Preferred Stock 135
Harold C. Alger...................................... Common Stock 18,619(8)
ESOP Preferred Stock 140(8)
Robert W. Coggin..................................... Common Stock 17,684
ESOP Preferred Stock 136
Thomas J. Roeck, Jr.................................. Common Stock 142,453(6)
ESOP Preferred Stock 150
Directors and Executive Officers as a Group (19
Persons)........................................... Common Stock 581,709(6)(9)
ESOP Preferred Stock 820(9)
</TABLE>
- ---------------
(1) No director or executive officer, individually or in the aggregate,
beneficially owned 1% or more of the Common Stock or ESOP Preferred Stock.
(2) 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.
(3) Includes 166 shares, 956 shares, 427 shares and 444 shares of Common Stock
attributable to Mr. Biedenharn, Mr. Budd, Mrs. Evans and Mr. Grinstein,
respectively, due to their selection of the
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<PAGE> 12
Delta Common Stock Fund investment return choice under the directors'
deferred compensation arrangement, described on page 4 of this proxy
statement.
(4) 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.
(5) Excludes 279,155 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.
(6) 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 -- 244,000; Mr. Roeck -- 135,800; and directors
and executive officers as a group -- 421,800.
(7) Excludes 50 shares of Common Stock held by Mr. Allen's spouse as custodian
for her minor children, and 100 shares held by Mr. Allen's adult children
and adult stepchildren. Mr. Allen disclaims beneficial ownership of these
shares.
(8) Excludes 13 shares of Common Stock and 22 shares of ESOP Preferred Stock
beneficially owned by Mr. Alger's spouse. Mr. Alger disclaims beneficial
ownership of these shares.
(9) Excludes 563 shares of Common Stock and 22 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 (5).
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
OF BENEFICIAL CLASS ON
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP AUGUST 29, 1997
- ------------------------------------ -------------------- ----------------- ---------------
<S> <C> <C> <C>
Wellington Management Company, LLP........ Common Stock 7,766,260(1) 10.5%
75 State Street
Boston, MA 02109
Vanguard/Windsor Funds, Inc............... Common Stock 4,722,000(2) 6.4%
Post Office Box 2600
Valley Forge, PA 19482-2600
The Capital Group Companies, Inc.......... Common Stock 4,024,670(3) 5.5%
333 South Hope Street
Los Angeles, CA 90071
Fidelity Management Trust Company......... ESOP Preferred Stock 6,654,686(4) 100.0%
82 Devonshire Street Common Stock 3,364,205(4) 4.6%
Boston, MA 02109
</TABLE>
- ---------------
(1) Based on a Schedule 13G dated July 3, 1997, in which Wellington Management
Company, LLP reported that it had sole voting power over none of such
shares, shared voting power over 289,960 of such shares and shared
dispositive power over all 7,766,260 of such shares.
(2) Based on a Schedule 13G dated February 7, 1997, in which Vanguard/Windsor
Funds, Inc. reported that it had sole voting power and shared dispositive
power over all 4,722,000 of such shares.
9
<PAGE> 13
(3) Based on a Schedule 13G dated February 12, 1997, in which The Capital Group
Companies, Inc. reported that it had sole voting power over 1,851,140 of
such shares, shared voting power over none of such shares, and sole
dispositive power over all 4,024,670 of such shares.
(4) These shares are held by Fidelity Management Trust Company as the trustee of
the Delta Family-Care Savings Plan.
THE DELTA FAMILY-CARE SAVINGS PLAN
Fidelity Management Trust Company is the trustee of the Delta Family-Care
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 1997, Delta
contributed 50c to a participant's Savings Plan 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, 1997, there were
approximately 58,000 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> 14
PERSONNEL & COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Personnel & Compensation Committee of the Board of Directors is pleased
to present this report on Delta's executive compensation program. This report
describes the executive compensation policies under which the Committee makes
decisions about executive pay, and discusses the principal components of the
current program. It also explains the basis on which the Committee made fiscal
1997 compensation determinations for the Chief Executive Officer and other
executive officers of the Company, including those named in the Summary
Compensation Table shown elsewhere in this proxy statement.
COMPENSATION STRATEGY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The Committee's foremost objective is to have an executive compensation
program that develops talented executives and motivates them to work for the
long-term advantage of the Company's primary stakeholder groups -- Delta
stockholders, Delta customers, and Delta people. The Committee believes that an
executive compensation program designed and administered with clear and strong
linkages to the Company's business strategy and long-term goals, particularly
the creation of shareholder value, will accomplish this objective.
Consistent with this philosophy, the Committee has structured the executive
compensation program to:
- Enable Delta to attract and retain a group of highly qualified and
experienced executives by providing a competitive total compensation
package;
- Focus Delta's executives on achieving aggressive financial and operating
goals tied to the Company's near- and long-term business objectives;
- Emphasize at risk pay by having a substantial portion of total pay
consist of incentive pay components that tie executives' rewards to
performance results achieved; and
- Closely link the long-term interests of Delta's executives to those of
its stockholders by having stock-based compensation comprise a major
portion of total pay opportunities. To further support this goal, the
Committee has established specific stock ownership levels for Delta
executives.
These principles apply to compensation determinations for all executive
officers. In making decisions about actual compensation levels, the Committee
considers all elements of the executive compensation program in total, and not
any one element in isolation. The Committee has selected and retained an
independent compensation consulting firm to assist it in evaluating and, as
appropriate, revising the executive compensation package to better support the
Company's business strategy and long-term goals.
The Committee believes it is important to consider the pay levels and
practices of the companies with which Delta competes for executives to ensure
that salary levels and incentive opportunities are competitive and support the
objectives listed above. The Committee therefore periodically compares Delta's
total pay opportunities and executive compensation components to the programs in
place at other major U.S. airlines, as well as those at a group that also
includes transportation, aerospace, service and selected consumer products
companies that generally are similar in size to Delta (in terms of revenues,
assets, employees, etc.). These comparisons reflect the fact that Delta's
competitors for executive talent extend beyond the Company's direct business
competitors. For this reason, the relevant market for pay comparisons is broader
than the airline peer companies who comprise the published industry index in the
Performance Graph shown elsewhere in this proxy statement.
11
<PAGE> 15
The Committee conducted its most recent review of executive compensation
during fiscal 1997. This study showed that overall, total compensation
opportunities for Delta's executives are below the average pay opportunities
provided by other major U.S. airlines, and are below those at the broader
comparator group as well. As a result of this review, the Committee made certain
changes to specific elements of the current program. These changes are discussed
in the separate description of each component below.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
The primary components of Delta's executive compensation package are base
salary, incentive compensation and stock-based awards.
Base Salary
The Committee's objective is to set base salaries for Delta's executive
officers at levels that are comparable to similar executive positions at other
major U.S. airlines or, where appropriate, the broader comparator group
described above. The Committee approves actual salaries for executives above the
level of Senior Vice President, and recommends the Chief Executive Officer's
salary to the Board for its approval.
Actual salary levels are based on a combination of factors that includes
the executive's performance, responsibilities, and experience, as well as the
salaries of comparably-placed executives in the competitive market. Equity
considerations relative to base pay for other Company executives also are
considered. The Committee exercises its discretion in making salary
recommendations and decisions, and does not apply a specific formula or
weighting to the factors listed above. Also, because the Company does not
establish an annual salary increase budget for executives, salary increases for
executives do not follow a preset schedule.
During fiscal 1997, the Committee increased salary rates for selected
executives (including the Chief Executive Officer, whose pay is discussed below)
in light of the factors mentioned above. Overall, however, salary rates for
Delta's executive officers generally remain somewhat below the average salaries
for comparable positions at the major U.S. airlines and the broader comparator
group discussed above.
Incentive Compensation Plan
The purpose of the Incentive Compensation Plan is to provide additional
cash compensation for achieving levels of financial and operating performance
that support the Company's near- and long-term strategic objectives. The plan
solidifies the link between pay and performance for Delta's executives by
clearly establishing the rewards that can be earned for meeting predetermined
goals.
For fiscal 1997, the Company's executive officers were eligible to earn
awards based on achieving specific goals for pre-tax income and operating
margin, weighted equally. In light of improved financial performance in the
airline industry, the Committee added operating margin as a measure to focus
participants on the quality of earnings in addition to their level. To emphasize
the importance of continued financial improvement, the Committee set the fiscal
1997 target performance goals at levels above the fiscal 1996 results for those
measures.
Target awards for executive officers (other than the Chief Executive
Officer, whose award is discussed below) were 50% of base salary, which is
somewhat below the average levels for comparable positions in the market for
some positions but slightly above for others. Awards earned based on the pre-tax
income and operating margin goals can range from a low of 25% of target once a
specified threshold performance level is achieved to a maximum of 150% of target
for exceeding both targeted goals by specified levels. Awards earned
12
<PAGE> 16
based on financial performance can be further increased by up to 25%, or
decreased to zero, based on individual performance. For most participants,
individual performance is measured for this purpose based on the performance
assessment process used for officers and other managers. The Committee
established specific and measurable goals related to financial results, customer
service, and operations for Senior Vice Presidents and above to comply with the
tax law requirements on deductible executive compensation under Section 162(m)
of the Internal Revenue Code.
For fiscal 1997, Delta's pre-tax income and operating margin results
exceeded the target goals set for the year but did not reach the maximum levels
established. As a result, and after considering adjustments for individual
performance, participants under the Incentive Compensation Plan earned awards
that were between the target and maximum levels for the year. Amounts paid to
the named executive officers (other than the Chief Executive Officer) reported
in the Summary Compensation Table in this proxy statement reflect the
achievement of some, but not all, of the individual performance goals
established. The Committee notes that although maximum performance levels were
not reached, Delta continued to substantially strengthen its financial condition
during fiscal 1997. The Company again achieved record levels of operating and
net income, reduced its long-term debt, increased stockholders' equity and
enhanced its competitive position.
For fiscal 1998, the Committee has determined that Delta's continued
attention to operations and its performance relative to peer airlines should be
a focus of all plan participants. Accordingly, the Committee has approved
additional plan measures in the areas of safety, customer satisfaction and
on-time performance. Also, the portion of awards based on operating margin will
be adjusted based on how actual results compare to those of selected industry
peers. The Committee believes these changes will enhance the overall
effectiveness of the plan.
Stock-Based Awards
Long-term incentive opportunities comprise the largest portion of the total
compensation package for executive officers. The Committee believes this
approach to total compensation provides the appropriate focus for those
executives who are charged with the greatest responsibility for managing the
Company and achieving success for all of Delta's stakeholders.
Stock-based compensation awards are made under the 1989 Stock Incentive
Plan. This plan provides that employees selected by the Committee can receive
awards of stock options, stock appreciation rights, restricted stock and other
stock-based awards; award types can vary from year to year at the Committee's
discretion. As described elsewhere in this proxy statement, the plan, as
amended, is being presented to stockholders to approve, among other items, the
future ability of the Committee to grant specific types of long-term
performance-based awards that meet the tax rules of Section 162(m) of the
Internal Revenue Code.
In January 1997, the Committee granted non-qualified stock options to
executive officers and selected other employees giving them the right to
purchase shares of Common Stock at an exercise price equal to $82.375, the
closing price of the Common Stock on the New York Stock Exchange on the date of
grant. Stock options granted in fiscal 1997 have a term of ten years, and become
exercisable in full on the first anniversary of the grant date. No stock options
granted under the plan have ever been repriced, nor does the Committee intend to
consider option repricing in the future.
To determine the number of stock options to grant to each participant, the
Committee has established award size guidelines that vary by level of
responsibility. The guidelines generally fall between the range of average award
opportunities at the other major U.S. airlines and those provided for comparable
positions at the broader comparator group. An annualized long-term award value
is determined for each eligible employee
13
<PAGE> 17
based on the applicable award level, and is converted to a number of stock
options by using the Black-Scholes option pricing model. The Committee may apply
its judgment to adjust the formula award based on individual performance,
contribution to Company success, and equity relative to other plan participants.
The Committee may also consider other factors from time-to-time in making stock
option awards.
STOCK OWNERSHIP GUIDELINES
In keeping with the principles outlined earlier in this report, the
Committee advocates stock ownership by Delta's executives. The Committee
believes that executives' interests will be more closely aligned with those of
Delta's stockholders if executives own meaningful amounts of Delta stock. For
this reason, the Committee has adopted guidelines requiring that executive
officers own Delta stock worth either two or three times base salary by a
certain date. Stock in the form of unexercised options or unvested restricted
stock is not counted for purposes of measuring compliance with the ownership
guidelines.
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. The Committee has
carefully considered the Company's executive officer compensation program in
light of the applicable rules, and believes that compliance with those rules
generally is in the Company's best interests. Accordingly, the material terms of
both the Incentive Compensation Plan and the 1989 Stock Incentive Plan have been
approved by shareholders. In rare circumstances, however, the Committee may
determine that exceptions to this practice will better support the Company's
compensation policies, business strategy and long-term goals.
As described elsewhere in this proxy statement, the amended 1989 Stock
Incentive Plan is being presented to shareholders for re-approval this year, in
part to give the Committee greater flexibility to grant performance based awards
consistent with Section 162(m), and also to re-establish the maximum number of
stock options that can be granted to any one person. The Committee believes
these changes are necessary for the appropriate operation of the plan going
forward and that they reinforce the Company's pay-for-performance practices.
FISCAL YEAR 1997 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As noted elsewhere in this proxy statement, Mr. Allen retired from the
Company as of July 31, 1997. Because he was Chief Executive Officer for the
entire fiscal year, this report discusses the Committee's decisions with respect
to his compensation during the year, as follows:
- Mr. Allen's annual base salary was restored on August 16, 1996 to its
prior level of $575,000. For the preceding four years, his salary had been
reduced at his request to $475,000 in light of the financial difficulties
the Company faced during that time.
- Mr. Allen's target award under the Incentive Compensation Plan for fiscal
1997 was conservatively established at 65% of his base salary. This
percentage award level is lower than the average target awards for chief
executives in each of the market groups discussed above.
In light of Mr. Allen's announcement that he would retire from the
Company, the Committee determined that it was not appropriate to grant Mr.
Allen an award under the Incentive Compensation Plan. To recognize Mr.
Allen's long service and contributions to the Company's financial success
over
14
<PAGE> 18
the past several years, to acknowledge the additional restrictive
covenants that he entered into in connection with his retirement, and to
extinguish any rights he may have had under any plan or contract, the
Company entered into the Retirement Agreement discussed elsewhere in this
proxy statement.
- In January 1997, the Committee granted Mr. Allen a non-qualified stock
option to purchase 54,000 shares of Common Stock. The Committee determined
the size and terms of Mr. Allen's grant under the same approach used to
establish the stock option awards to all other employees receiving grants
under the 1989 Stock Incentive Plan.
OTHER MATTERS
During fiscal 1997, the Board of Directors considered the importance of
adopting a process by which this Committee would conduct an annual and
independent evaluation of the Chief Executive Officer's performance that
involves written feedback from all directors. The Committee intends to implement
this process during fiscal 1998.
The Committee and Board also determined that it would be in the Company's
best interests to implement a Retention Protection Program to provide certain
benefits in the event a change in control occurs. This program is described in
more detail elsewhere in this proxy statement.
Respectfully submitted,
THE PERSONNEL & COMPENSATION COMMITTEE
Gerald Grinstein, Chairman
James L. Broadhead
R. Eugene Cartledge
Mary Johnston Evans
15
<PAGE> 19
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 as of June 30,
1997 (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-
SALARY PLAN) COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- --------------------------- ---- ------- ------------ ------------ ---------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald W. Allen.................. 1997 562,500 0 14,183 0 54,000 0 20,568
Chairman of the Board,
President 1996 475,000 532,594 12,517 0 66,000 0 15,504
and Chief Executive Officer
(retired 1995 475,000 560,625 11,667 390,000 89,000 0 15,876
effective July 31, 1997)(7)
Maurice W. Worth................. 1997 333,333 205,743 8,639 0 21,000 0 13,700
Executive Vice President -- 1996 282,500 237,500 7,123 0 26,000 0 11,823
Customer Service & Acting Chief 1995 251,250 187,500 6,375 124,800 19,500 0 12,064
Operating Officer
Harold C. Alger.................. 1997 333,333 205,743 8,639 0 21,000 0 13,700
Executive Vice President -- 1996 300,000 237,500 7,909 0 26,000 0 12,796
Operations 1995 287,083 206,250 8,123 145,600 29,000 0 13,061
Robert W. Coggin................. 1997 333,333 211,621 8,639 0 21,000 0 13,700
Executive Vice President -- 1996 291,250 237,500 7,507 0 26,000 0 12,298
Marketing 1995 269,167 187,500 5,518 124,800 25,500 0 12,562
Thomas J. Roeck, Jr.............. 1997 298,333 191,243 7,523 0 16,000 0 12,318
Senior Vice President -- 1996 285,000 213,216 7,507 0 19,500 0 12,298
Finance and Chief Financial 1995 277,083 206,250 5,518 124,800 22,000 0 12,562
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 1997 were paid in the first quarter of fiscal 1998.
(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 1997 or 1996. The value of
the restricted stock 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.
Worth -- 2,400 shares; Mr. Alger -- 2,800 shares; Mr. Coggin -- 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. Under Mr. Allen's
Retirement Agreement, discussed on pages 20-21 of this proxy statement, the
restrictions on Mr. Allen's fiscal 1995 restricted stock award lapsed at the
time of his retirement. At June 30, 1997, the total number of shares and
aggregate value (based on the $82.00 closing price of the
16
<PAGE> 20
Common Stock on the NYSE on June 30, 1997) of restricted stock, including
shares acquired with reinvested dividends, of the following named executive
officers was: Mr. Allen -- 7,550 shares valued at $619,100; Mr.
Worth -- 2,416 shares valued at $198,112; Mr. Alger -- 2,818 shares valued
at $231,076; Mr. Coggin -- 2,416 shares valued at $198,112; and Mr.
Roeck -- 2,416 shares valued at $198,112.
(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 currently have a plan which meets the definition of a
Long Term Incentive Plan.
(6) In fiscal 1997, the Company paid supplemental group life insurance premiums
for the named executive officers as follows: Mr. Allen -- $17,568; Mr.
Worth -- $10,700; Mr. Alger -- $10,700; Mr. Coggin -- $10,700; and Mr.
Roeck -- $9,318. The Company made contributions under the Delta Family-Care
Savings Plan, a qualified defined contribution pension plan, of $3,000 for
each named executive officer.
(7) Mr. Allen retired effective July 31, 1997. See pages 20-21 of this proxy
statement for information regarding his Retirement Agreement.
The following table sets forth certain information regarding awards of
stock options to the named executive officers during fiscal 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
------------------------------------------------------ -----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE($)(2)
- ---- ------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Ronald W. Allen................................ 54,000 7.4 82.375 1/22/2007 1,585,440
Maurice W. Worth............................... 21,000 2.8 82.375 1/22/2007 616,560
Harold C. Alger................................ 21,000 2.8 82.375 1/22/2007 616,560
Robert W. Coggin............................... 21,000 2.8 82.375 1/22/2007 616,560
Thomas J. Roeck, Jr............................ 16,000 2.2 82.375 1/22/2007 469,760
</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 23, 1997, the date of grant. These grants, which do not include
SARs, become exercisable on January 23, 1998.
(2) These hypothetical grant date present values were determined using the
Black-Scholes model and, consistent with the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
include the following material assumptions and adjustments: an expected
option term of 5.1 years; an interest rate of 6.33% representing the
interest rate on a U.S. Treasury security on the date of grant with a
maturity date corresponding to the expected option term; a volatility rate
of 26.121% calculated using monthly Common Stock closing price and dividend
information for the 5.1 year period prior to the date of grant; and a
dividend yield of 0.24% representing the current $0.20 per share annualized
dividends divided by the fair market value of the Common Stock at the date
of grant. 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.
17
<PAGE> 21
The following table sets forth certain information regarding stock options
and stock appreciation rights exercised by the named executive officers in
fiscal 1997, as well as the number and value of their unexercised in-the-money
stock options and stock appreciation rights at June 30, 1997 (based on the
$82.00 closing price of the Common Stock on the New York Stock Exchange on June
30, 1997).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END(#) AT FY-END($)
SHARES VALUE --------------------------- ---------------------------
ACQUIRED ON REALIZED
NAME EXERCISE(#)(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Allen................ 19,875 4,758,125 244,000 54,000 5,854,625 0
Maurice W. Worth............... 26,000 637,000 0 21,000 0 0
Harold C. Alger................ 31,000 609,375 0 21,000 0 0
Robert W. Coggin............... 51,500 1,350,438 0 21,000 0 0
Thomas J. Roeck, Jr............ 0 0 135,800 16,000 2,426,788 0
</TABLE>
- ---------------
(1) The shares reported for Mr. Allen were acquired upon the exercise of stock
appreciation rights covering 185,000 shares of Common Stock. These stock
appreciation rights were payable 40% in Common Stock and 60% in cash. All
other shares reported in this column were acquired upon the exercise of
stock options covering the same number of shares of Common Stock as the
shares acquired.
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 1997 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
- ------------- ----------- ----------- ----------- ----------- ----------
<C> <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
1,600,000 320,000 480,000 640,000 800,000 960,000
</TABLE>
18
<PAGE> 22
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 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 following persons named in the Summary
Compensation Table are as follows: Mr. Worth -- $450,000/36 years; Mr.
Alger -- $350,000/31 years*; Mr. Coggin -- $350,000/36 years; and Mr.
Roeck -- $305,000/10 years. See the Summary Compensation Table on page 16 of
this proxy statement for information regarding payments under the Company's
Incentive Compensation Plan. Employees designated by the Personnel &
Compensation 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.
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 Internal Revenue 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
Committee, including the named executive officers.
Mr. Allen retired effective July 31, 1997, with 34 years of service. See
pages 20-21 of this proxy statement for information regarding Mr. Allen's
retirement and survivor benefits under the Retirement Agreement.
- ---------------
* For 27 of his 31 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.
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<PAGE> 23
OTHER MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel & Compensation 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.
RETENTION PROTECTION AGREEMENTS
Effective August 1, 1997, Delta entered into Retention Protection
Agreements ("Retention Agreements") with all of the named executive officers
(other than Mr. Allen) and certain other management personnel. These agreements
provide certain benefits that vary by participation level to covered individuals
if there is a Qualifying Event (as defined) during the term of the Retention
Agreement. A Qualifying Event occurs if, within a specified period after a
Change in Control (as defined), (1) there is an involuntary termination of the
individual's employment by Delta, other than for Cause (as defined) or due to
the individual's death or disability; or (2) the individual voluntarily
terminates his employment for Good Reason (as defined). A Qualifying Event also
occurs if there is a Change in Control within one year after a termination under
either circumstance described in the preceding sentence as a result of actions
taken by Delta in anticipation of a Change in Control.
A Change in Control is generally defined as (1) the acquisition of 20% or
more of the combined voting power of Delta stock; (2) a change in the
composition of the Board of Directors such that the persons who were directors
at the beginning of any two-year period (and any new director whose election was
approved by at least two-thirds of directors then still in office who either
were directors at the beginning of the period or whose election was so approved)
cease to constitute a majority of the Board; or (3) a reorganization, merger or
consolidation of Delta, or the Company's stockholders' approval of a sale of all
or substantially all the assets of Delta, other than in certain specified
circumstances.
The benefits provided upon a Qualifying Event for executive officers
include a lump sum payment of either two or three times the sum of the
individual's annual base salary rate and target incentive compensation award;
the present value of the individual's non-qualified pension benefits (with
certain additional age and service credits); certain retiree medical and monthly
survivor coverage (or the present value equivalent, depending on the
individual's age) and life insurance coverage; certain flight benefits; and
payment of any compensation deferred under Delta's Executive Deferred
Compensation Plan. In addition, upon a Change in Control, pro rata target
incentive compensation awards will be paid under the Incentive Compensation
Plan, and all outstanding stock options, restricted stock and similar awards
granted under the 1989 Stock Incentive Plan will immediately vest and become
nonforfeitable and exercisable. The Retention Agreements also provide for
reimbursement to the individual for taxes on certain welfare benefits as well as
any excise taxes paid under Section 4999 of the Internal Revenue Code and
related taxes thereon.
AGREEMENT WITH MR. ALLEN
Effective July 31, 1997, Mr. Allen retired as Chairman of the Board,
President and Chief Executive Officer, and resigned as a director of the
Company. In connection with Mr. Allen's retirement and resignation, Delta and
Mr. Allen entered into an agreement ("Retirement Agreement") which replaced and
superseded
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<PAGE> 24
Mr. Allen's employment agreement with Delta. Under the Retirement Agreement, Mr.
Allen agreed to certain restrictions on his ability to provide services to major
U.S. airlines that compete with Delta, and to restrictions on his solicitation
of employment of Delta employees and disclosure of confidential information
relating to Delta. In addition, Mr. Allen and Delta agreed under the Retirement
Agreement to release each other from any claims relating to Mr. Allen's
employment with or retirement from Delta. The Retirement Agreement provides that
Mr. Allen will serve as a consultant to Delta for seven years, subject to
extension in certain circumstances to eight years, in exchange for an annual
consulting fee of $500,000.
In settlement of Mr. Allen's rights under his existing employment agreement
and under certain employee benefit plans and arrangements, and in return for Mr.
Allen's undertakings as described above, Delta agreed under the Retirement
Agreement to provide Mr. Allen with a lump sum severance payment of $4,501,000,
as well as supplemental pension benefits sufficient to provide Mr. Allen with a
total annual retirement benefit (including his benefits under Delta's existing
qualified and non-qualified pension plans, but before plan related reductions
such as the Social Security offset and preretirement survivor benefit charges)
of $765,000 per year. In addition, Delta agreed to provide Mr. Allen with
retiree life and medical insurance coverage as though he had retired at age 65;
survivor benefits under the Company's Disability and Survivorship Plan (see page
19) based on assumed final average earnings for purposes of that plan of
$106,333 per month; and certain fringe benefits, including flight privileges,
office space and secretarial services. The Retirement Agreement also provides
for Mr. Allen's election as a lifetime advisory director of Delta, and for the
Company to pay Mr. Allen's reasonable legal fees in connection with the
preparation of the Retirement Agreement. Pursuant to the Retirement Agreement,
upon his retirement and resignation, all stock options held by Mr. Allen became
nonforfeitable, and restrictions on all of Mr. Allen's shares of restricted
stock lapsed.
EMPLOYMENT AGREEMENT WITH MR. MULLIN
The Board of Directors elected Mr. Mullin as Delta's President and Chief
Executive Officer effective August 14, 1997. The Company and Mr. Mullin have
entered into an agreement ("Employment Agreement") regarding Mr. Mullin's
employment with Delta.
The Employment Agreement provides for Mr. Mullin's employment through the
later of August 31, 2002, or the first anniversary of the date written notice of
intent to terminate is provided by either party. Under the Employment Agreement,
Mr. Mullin will receive an annual salary of $650,000, subject to possible future
increases; and will have the opportunity to receive an annual incentive award
under the Company's Incentive Compensation Plan, with a guaranteed award for
fiscal 1998 equal to Mr. Mullin's base salary. The Employment Agreement also
provides for Mr. Mullin to participate in the Company's employee benefit
programs, including insurance, retirement and fringe benefits, on terms no less
favorable than the terms offered to other senior executives of the Company; for
the Company to pay certain costs incurred by Mr. Mullin in connection with his
relocation to the Atlanta area as well as his reasonable legal fees in
connection with the preparation of the Employment Agreement; and for Mr. Mullin
to receive from the Company a retirement benefit equal to that which Mr. Mullin
would have earned under the Company's defined benefit plans, calculated
crediting Mr. Mullin with 22 years of service plus the number of years of
service attributable to his actual service with the Company. The retirement
benefit will vest on August 14, 2000, and will be offset by benefits provided
Mr. Mullin under the Company's qualified and non-qualified defined benefit
plans, as well as by Mr. Mullin's Social Security benefits. Special provisions
apply upon Mr. Mullin's retirement prior to age 60 or death prior to
commencement of benefits.
In the event of the termination of Mr. Mullin's employment during the term
of the Employment Agreement by Delta without Cause (as defined), or by Mr.
Mullin for Good Reason (as defined), the
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Employment Agreement generally provides that Mr. Mullin will be entitled to a
lump sum payment equal to two times the sum of his final annual salary and the
greater of his most recent target or actual annual incentive award; to a
prorated target incentive award; and to continuation of medical and other
benefits for two years after termination. In addition, upon termination under
these circumstances, Mr. Mullin will be credited with two additional years of
service for purposes of the retirement benefit described above, and to immediate
vesting of the retirement benefit and of stock options and restricted stock. For
these purposes, Cause and Good Reason are generally defined in a manner similar
to the definitions of these terms in the Retention Agreements described above.
In the event of a Change in Control of the Company, as defined in the Retention
Agreements, the Employment Agreement provides that Mr. Mullin will be entitled
to all of the benefits afforded to senior executives under the Retention
Agreements. In addition, in the event of a Change In Control, the definition of
Good Reason applicable to Mr. Mullin will include Mr. Mullin's resignation from
the Company during the sixty-day period commencing on the first anniversary of
the Change In Control.
On August 14, 1997, Delta granted to Mr. Mullin under the Company's 1989
Stock Incentive Plan non-qualified stock options to purchase 500,000 shares of
Common Stock at an exercise price of $88.3125 per share, the opening price of
the Common Stock on the New York Stock Exchange on that date; and 6,000 shares
of restricted stock. The stock options will become exercisable as to 200,000
shares on August 14, 1998, and as to an additional 100,000 shares on August 14,
1999, 2000 and 2001. The restricted shares granted to Mr. Mullin will become
nonforfeitable in three equal installments on July 1, 1998, 1999 and 2000.
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 1997 all Reporting Persons
complied with their Section 16(a) filing obligations, except that a Form 4
reporting one transaction involving the exercise of stock appreciation rights by
Mr. Robert G. Adams, the Company's Senior Vice President -- Personnel, was filed
shortly after its due date.
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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, 1992
<TABLE>
<CAPTION>
DELTA AIR S&P 500 S&P 500
DATE LINES STOCK INDEX AIRLINE INDEX
<S> <C> <C> <C>
June 1992 $100.00 $100.00 $100.00
June 1993 $ 90.36 $113.57 $ 99.69
June 1994 $ 84.86 $115.20 $ 91.21
June 1995 $138.81 $145.14 $110.30
June 1996 $156.64 $182.78 $133.56
June 1997 $156.33 $246.08 $138.21
</TABLE>
(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 US Airways Group.
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 1998, subject to ratification by the stockholders. Arthur
Andersen LLP has served as the Company's independent auditors since 1949. A
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<PAGE> 27
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will have an 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 1989 STOCK INCENTIVE PLAN AS AMENDED
The 1989 Stock Incentive Plan ("Plan") is a stock-based incentive
compensation plan. It is intended to closely link the long-term interests of
Delta's management and stockholders by directly tying a key element of the
Company's executive compensation program to the value of the Common Stock. The
Plan also assists Delta in attracting and retaining individuals who are
important to the Company's success.
The Plan provides officers and key employees of the Company and its
subsidiaries with the opportunity to receive awards of Stock Options, Stock
Appreciation Rights, Restricted Stock and Other Stock-Based Awards. The
stockholders of the Company approved the Plan in 1988, and certain amendments to
the Plan in 1993. The Plan became effective on January 1, 1989.
On July 24, 1997, the Board of Directors amended the Plan in certain
respects, subject to stockholder approval of the Plan as so amended. These
amendments ("1997 Amendments") include (1) extending from December 31, 1998 to
December 31, 2003 the period during which awards may be granted under the Plan;
(2) increasing from 6 million to 9.8 million the number of shares of Common
Stock authorized for distribution under the Plan; (3) adopting a 1.2 million
limit on the aggregate number of shares of Common Stock subject to Restricted
Stock awards and non-performance based Other Stock-Based Awards that may be
granted in the future; (4) increasing the Company's ability to grant long-term
performance based awards that comply with Section 162(m) of the Internal Revenue
Code by establishing performance measures which the Committee may use in making
Other Stock-Based Awards; (5) changing the maximum number of shares of Common
Stock subject to Stock Options and Stock Appreciation Rights that may be granted
to a participant in the future; and (6) adopting annual limits on the number of
shares of Common Stock subject to Restricted Stock awards and Other Stock-Based
Awards. The Board of Directors believes these changes give the Company the
necessary flexibility to adapt to changing economic and competitive conditions;
reinforce the Company's pay for performance practices; and are otherwise
appropriate for the future operation of the Plan.
The Board of Directors is submitting the Plan as amended by the 1997
Amendments to stockholders for approval so that certain awards under the Plan
may qualify as "performance based" compensation under Section 162(m) of the
Internal Revenue Code, and to comply with certain New York Stock Exchange
requirements. As described in the Personnel & Compensation Committee's Report on
Executive Compensation on page 14 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 as amended by the 1997
Amendments is qualified in its entirety by reference to the full text of the
Plan attached to this proxy statement as Appendix A.
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<PAGE> 28
Administration. The Plan is administered by a committee of the Board of
Directors (currently the Personnel & Compensation Committee), designated by the
Board and consisting of at least three directors ("Committee"). Subject to the
terms of the Plan, the Committee has the authority to interpret the Plan; to
establish rules relating to the Plan; to make awards under the Plan; and to take
all actions in connection with the Plan as it may deem necessary or advisable.
Eligibility. Awards under the Plan may be made to officers and key
employees of the Company and its subsidiaries, as determined by the Committee.
The Plan does not impose any limit on the number of persons to whom awards may
be made.
Term of Plan. Awards may be granted under the Plan until January 1, 2004.
Awards granted before January 1, 2004 may extend beyond that date.
Number of Shares. The total number of shares of Common Stock currently
authorized for distribution under the Plan is 6 million, which will increase to
9.8 million on January 1, 1998. Of the 6 million shares of Common Stock
currently authorized, approximately 2.15 million shares are presently available
for distribution for future awards under the Plan. Common Stock issued under the
Plan may be either authorized and unissued shares or treasury shares.
Types of Awards. The Committee may grant the following types of awards
under the Plan: Stock Options; Stock Appreciation Rights; Restricted Stock; and
Other Stock-Based Awards.
Stock Options. The Committee may grant Incentive Stock Options and
Non-Qualified Stock Options. A Stock Option is exercisable at such times and
subject to such terms and conditions as the Committee may determine, but no
Stock Option may be exercised less than one year or more than ten years after
its date of grant. The one year limitation does not apply, however, if a
participant dies prior to one year after the date of grant; the participant's
employment is terminated under circumstances designated by the Committee; or
there is a Change in Control of Delta. Unless otherwise determined by the
Committee, a Stock Option is not transferable other than by will, by the laws of
descent and distribution or by a written designation which takes effect at the
participant's death.
The option price for each share of Common Stock covered by a Stock Option
may not be less than the fair market value of the Common Stock on the date the
Stock Option is granted. Payment of the option price may be in cash or, if
approved by the Committee, by unrestricted Common Stock having a fair market
value equal to the option price.
For awards granted on or before December 31, 1997, the number of shares of
Common Stock subject to Stock Options that may be awarded to a participant may
not exceed 10% of the maximum number of shares of Common Stock authorized for
distribution under the Plan. For awards granted after that date, the number of
shares of Common Stock subject to Stock Options that may be awarded to a
participant may not exceed 350,000 each calendar year.
Stock Appreciation Rights. Stock Appreciation Rights may be granted only
in conjunction with Stock Options and are exercisable only when the related
Stock Options are exercisable. When a Stock Appreciation Right is exercised, the
related Stock Option terminates; when a Stock Option is exercised, the related
Stock Appreciation Right terminates. A Stock Appreciation Right is transferable
only when and to the extent the related Stock Option is transferable.
Upon exercise of a Stock Appreciation Right, the Company will pay to the
participant in cash, Common Stock, or a combination of cash and Common Stock
(the method of payment to be at the discretion of the Committee), an amount
equal to the excess, if any, of the fair market value of one share of Common
Stock over the option price, multiplied by the number of shares of Common Stock
in respect of which the Stock
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<PAGE> 29
Appreciation Right is exercised. For these purposes, the fair market value of
the Common Stock is its fair market value on the last trading day preceding the
date the Stock Appreciation Right is exercised or, if specified by the
Committee, its highest fair market value during a designated period in which the
Stock Appreciation Right is exercised.
The number of shares of Common Stock subject to Stock Appreciation Rights
that may be awarded to a participant may not exceed the Stock Option limit
discussed above.
Restricted Stock. The Committee may determine the terms and conditions of
any Restricted Stock award, including the applicable restrictions; the period
during which the award is subject to such restrictions ("Restriction Period");
and the price, if any, payable by a participant. During the Restriction Period,
the participant may not sell, transfer, pledge or assign the Restricted Stock,
but will have the right to vote the Restricted Stock and to receive any cash
dividends. The Committee may permit or require the deferral and reinvestment of
any cash dividends in the form of additional shares of Restricted Stock.
The number of shares of Common Stock subject to Restricted Stock awards
that may be granted to a participant may not exceed 200,000 each calendar year.
Other Stock-Based Awards. The Committee may also grant other types of
awards that are valued, in whole or in part, by reference to or otherwise based
on the Common Stock. These awards will be made upon such terms and conditions as
the Committee may in its discretion provide, subject to the provisions of the
Plan.
To enable the Committee to make performance based awards consistent with
Section 162(m) of the Internal Revenue Code, the Plan lists various performance
measures which may be used by the Committee with respect to Other Stock-Based
Awards. These performance measures are: total shareholder return; return on
equity, assets, capital or investment; operating, pre-tax or after-tax profit
levels expressed in either absolute dollars, earnings per share, or increases of
the same; revenues or revenue growth; Common Stock price; cash flow; economic or
cash value added; results of customer satisfaction surveys; or other measures of
quality, safety, productivity or process improvement. The performance measures
may be determined solely by reference to the performance of Delta, a subsidiary
of the Company, or a division or unit of any of the foregoing, or based on
comparisons of any of the performance measures relative to other companies.
The number of shares of Common Stock subject to Other Stock-Based Awards
that may be granted to a participant may not exceed 200,000 each calendar year.
Other Limitations. The aggregate number of shares of Common Stock subject
to Restricted Stock awards and non-performance based Other Stock-Based Awards
that may be granted under the Plan on or after January 1, 1998 may not exceed
1.2 million.
Amendment and Termination. The Board of Directors may amend or terminate
the Plan, but no such amendment or termination may be made which would impair a
participant's right with respect to an outstanding award without that
participant's consent.
Adjustment. In the case of a merger, reorganization, consolidation,
recapitalization, Common Stock dividend, Common Stock split, or other changes in
the Company's corporate structure affecting the Common Stock, the Committee may
make such modifications or adjustments as it deems necessary to prevent the
deletion or enlargement of rights, including adjustments in the number of shares
available for distribution under the Plan; the number of shares covered by
awards then outstanding under the Plan; the option price for outstanding Stock
Option awards; and any limitation on the aggregate number of awards which may be
granted to a participant.
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<PAGE> 30
Replenishment. To the extent any award under the Plan is settled in cash
rather than in shares of Common Stock, or is forfeited or otherwise terminates
without a payment to the participant in shares of Common Stock, the number of
shares of Common Stock subject to that award, less the number of shares of
Common Stock issued, if any, in connection with that award, will again be
available for distribution for future awards under the Plan.
Change In Control. Upon the occurrence of a Change in Control of Delta,
(1) all outstanding Stock Options and Stock Appreciation Rights will become
immediately vested, exercisable and nonforfeitable; (2) the restrictions on
outstanding non-performance based Restricted Stock and Other Stock-Based Awards
will lapse; and (3) outstanding performance based Restricted Stock and Other
Stock-Based Awards will be paid on a prorated basis as specified in the Plan.
A Change in Control is generally defined as (1) the acquisition of 20% or
more of the combined voting power of Delta stock; (2) a change in the
composition of the Board of Directors such that the persons who were directors
at the beginning of any two-year period (and any new director whose election was
approved by at least two-thirds of directors then still in office who either
were directors at the beginning of the period or whose election was so approved)
cease to constitute a majority of the Board; (3) a reorganization, merger or
consolidation of Delta, other than in certain circumstances; or (4) the
Company's stockholders' approval of a complete liquidation or dissolution of the
Company, or a sale of all or substantially all the assets of Delta other than in
certain circumstances.
B. FEDERAL INCOME TAX ASPECTS
The following is only a brief summary of the federal income tax aspects of
awards made under the Plan based upon the federal income tax laws in effect on
the date hereof. This summary is not intended to be exhaustive, and does not
describe a number of special tax rules, including the alternative minimum tax,
and various elections which may be applicable under certain circumstances.
A participant who has been granted Stock Options, Stock Appreciation Rights
or Restricted Stock will not realize taxable income at the date of grant, and
the Company will not be entitled to a deduction at that time.
A participant who exercises an Incentive Stock Option (within the meaning
of the Internal Revenue Code) will not be subject to taxation at the time of
exercise, nor will the Company be entitled to a deduction; however, the
difference between the exercise price and the fair market value of shares on the
date of exercise is a tax preference item for purposes of determining a
participant's alternative minimum tax. A disposition of the purchased shares
after the expiration of the required holding periods will subject the
participant to taxation at long-term capital gains rates in the year of
disposition in an amount determined under the Internal Revenue Code and the
Company will not be entitled to a deduction for federal income tax purposes. A
disposition of the purchased shares prior to the expiration of the applicable
holding periods will subject the participant to taxation at ordinary income
rates in the year of disposition in an amount determined under the Internal
Revenue Code, and the Company generally will be entitled to a corresponding
deduction.
A participant who exercises a Non-Qualified Stock Option will realize
ordinary income in an amount measured by the excess of the fair market value of
the shares on the date of exercise over the option price. A participant who
exercises a Stock Appreciation Right will recognize ordinary income equal to the
fair market value of the shares and any cash received. In each case, the Company
generally will be entitled to a corresponding deduction for federal income tax
purposes.
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<PAGE> 31
A participant holding Restricted Stock will, at the time the shares vest,
realize ordinary income in an amount equal to the fair market value of the
shares and any cash received at the time of vesting, and the Company generally
will be entitled to a corresponding deduction for federal income tax purposes.
Dividends paid to the participant on the Restricted Stock during the Restriction
Period generally will be ordinary income to the participant and deductible as
such by the Company.
The federal income tax consequences of Other Stock-Based Awards will depend
upon the form such awards take.
As discussed above, Section 162(m) of the Internal Revenue Code limits the
corporate federal income tax deduction for pay to executives in certain
circumstances.
C. OTHER MATTERS
The Committee has discretion to determine the type, amount and recipients
of awards under the Plan, subject to certain limitations discussed above.
Accordingly, the awards which may be made in the future under the Plan as
amended by the 1997 Amendments cannot presently be determined. If the Plan as
amended by the 1997 Amendments is not approved by the stockholders, no awards
will be made under the Plan as so amended. In that event, the Board of Directors
intends to review and reconsider the Company's executive compensation program in
light of such vote and the principles described in the Personnel & Compensation
Committee's Report on Executive Compensation.
The Summary Compensation Table and the Option/SAR Grants In Last Fiscal
Year table on pages 16 and 17, respectively, of this proxy statement set forth
the awards made under the Plan in fiscal 1997 for each of the named executive
officers. During fiscal 1997, all executive officers as a group (which included
7 persons), and all employees as a group (which included 280 persons), were
granted Non-Qualified Stock Options with respect to 157,500 shares and 726,150
shares, respectively, of Common Stock.
On August 29, 1997, the closing price of the Common Stock on the New York
Stock Exchange was $86.50 per share.
D. BOARD RECOMMENDATION
The Board of Directors believes the Plan as amended by the 1997 Amendments
is in the best interests of the Company and its stockholders. ACCORDINGLY, THE
BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE PLAN AS AMENDED.
PROPOSAL 4
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. recommend
that the Board of Directors take the necessary steps to rotate the annual
meeting between Atlanta, Cincinnati, Monroe, La., Salt Lake City, Los
Angeles, and other major cities where Delta has hubs, spokes and/or a major
concentration of shareholders.
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Except for one year (1995) Delta has had its annual meeting in a very
small town -- Monroe, La. A town lacking First Class hotel accommodations.
Stockholders in other parts of the country are entitled to meet
management and directors. A large part of attendees are employee
stockholders.
The many problems facing Delta makes maximum participation of outside
independent stockholders most desirable. We recommend every fifth year in
Monroe, and in other years ELSEWHERE.!!!
In 1994 the owners of 8,341,380 shares, representing approximately 19%
of shares voting, voted FOR my similar proposal."
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
The Company takes pride in its development from a small crop dusting firm
in Monroe, Louisiana, to a major international airline. Delta has traditionally
held its annual meeting in Monroe in tribute to that area as the Company's
birthplace, and to stress the importance of history, continuity and stability to
Delta.
The Board recognizes it may be appropriate to hold future annual meetings
in cities in which the Company has a large concentration of stockholders or
substantial operations. In fact, the Company held the 1995 annual meeting in
Atlanta, and intends to hold future annual meetings in other major cities,
returning to Monroe on a regular basis to renew Delta's connection with the
place and the people that created the Company. The Board believes the location
of the annual meeting is a matter which should be left to its discretion.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
PROPOSAL 5
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
33,800 shares of Common Stock, has given notice that it will introduce the
following resolution at the Annual Meeting:
"WHEREAS, Delta Air Lines is the third largest airline in the United
States serving a global market base. We believe there is an urgent need for
corporate commitment to equal employment opportunity. We further believe a
clear policy opposing all forms of discrimination is a sign of a socially
responsible company. Since a substandard equal employment 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.
Workplace discrimination has created a significant financial burden
for shareholders. Over the last three years, companies such as Shoney's,
Incorporated, Hughes Aircraft, and Texaco have posted direct multi-million
dollar losses as a result of settling various discrimination lawsuits. The
high cost of legal expenses, potential loss of government contracts, and
the financial consequences of a damaged corporate image as the result of
discrimination allegations place this issue as a high priority for
stakeholders.
Investors have closely watched the development of the bi-partisan
Glass Ceiling Commission study, which shows that diversity has a positive
impact on the corporate bottom line. Women and persons of
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color compromise 57% of the workforce, yet hold only 3% of executive
management positions. Women who were awarded more than half of all master
degrees, represent less than 5% of senior level management positions, and
earn about 72 cents for every dollar earned by men. This represents a
serious deficiency in our ability to select the most talented people for
top management positions.
More than 140 major employers provide public reports on workplace
diversity. For example, Capital Cities/ABC's Commitment Report; US Air's
"Affirming Workplace Diversity"; and Amoco's "Diverse Work Force", to name
a few. The Glass Ceiling Commission recommends that ". . . both public and
private sectors work toward increased public disclosure of diversity data."
BE IT 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, 1998.
1. A chart identifying employees by sex and race in each of the nine major
EEOC defined job categories for 1994, 1995, and 1996, 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 persons
of color 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."
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 1998 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, 1998, and must comply in all respects with the
applicable Securities and Exchange Commission rules and regulations.
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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.
ANNUAL REPORT
This proxy statement is accompanied, or preceded, by the Company's Annual
Report to Stockholders for the fiscal year ended June 30, 1997. 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.
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APPENDIX A
1989 STOCK INCENTIVE PLAN
OF
DELTA AIR LINES, INC.
AS AMENDED EFFECTIVE OCTOBER 23, 1997
SECTION 1. Purpose; Definitions.
The purpose of this plan, which shall be known as the "1989 Stock Incentive
Plan of Delta Air Lines, Inc." (the "Plan"), is to promote the interests of
Delta Air Lines, Inc. (the "Company") by attracting and retaining in its
employment persons of outstanding ability, and to provide present and future
officers and key employees of the Company, or any of its present or future
Subsidiaries, greater incentive to make material contributions to the success of
the Company by increasing their proprietary interest in the welfare and success
of the Company through increased direct stock ownership and other incentives
related to the value of the stock, all to the benefit of the Company and its
shareholders.
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Affiliate" and "Associate" have the respective meanings accorded to
such terms in Rule 12b-2 under the Exchange Act as in effect on July 24,
1997.
"Beneficial Ownership". A Person shall be deemed the "Beneficial
Owner" of, and shall be deemed to " beneficially own," securities pursuant
to Rule 13d-3 under the Exchange Act as in effect on July 24, 1997.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Change in Control" means, and shall be deemed to have occurred upon,
the first to occur of any of the following events:
(a) Any Person (other than an Excluded Person) acquires, together
with all Affiliates and Associates of such Person, Beneficial Ownership
of securities representing 20% or more of the combined voting power of
the Voting Stock then outstanding, unless such Person acquires
Beneficial Ownership of 20% or more of the combined voting power of the
Voting Stock then outstanding solely as a result of an acquisition of
Voting Stock by the Company which, by reducing the Voting Stock
outstanding, increases the proportionate Voting Stock beneficially owned
by such Person (together with all Affiliates and Associates of such
Person) to 20% or more of the combined voting power of the Voting Stock
then outstanding; provided, that if a Person shall become the Beneficial
Owner of 20% or more of the combined voting power of the Voting Stock
then outstanding by reason of such Voting Stock acquisition by the
Company and shall thereafter become the Beneficial Owner of any
additional Voting Stock which causes the proportionate voting power of
Voting Stock beneficially owned by such Person to increase to 20% or
more of the combined voting power of the Voting Stock then outstanding,
such Person shall, upon becoming the Beneficial Owner of such additional
Voting Stock, be deemed to have become the Beneficial Owner of 20% or
more of the combined voting power of the Voting Stock then outstanding
other than solely as a result of such Voting Stock acquisition by the
Company;
(b) During any period of two consecutive years (not including any
period prior to July 24, 1997), individuals who at the beginning of such
period constitute the Board (and any new Director,
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whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election was
so approved), cease for any reason to constitute a majority of Directors
then constituting the Board;
(c) A reorganization, merger or consolidation of the Company is
consummated, in each case, unless, immediately following such
reorganization, merger or consolidation, (i) more than 50% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners of the Voting Stock outstanding immediately prior to
such reorganization, merger or consolidation, (ii) no Person (but
excluding for this purpose any Excluded Person and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the voting power
of the outstanding Voting Stock) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) The shareholders of the Company approve (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to any corporation with respect to which, immediately
following such sale or other disposition, (A) more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners of the Voting Stock outstanding
immediately prior to such sale or other disposition of assets, (B) no
Person (but excluding for this purpose any Excluded Person and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the voting power of
the outstanding Voting Stock) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common
stock of such corporation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition of
assets of the Company.
Notwithstanding the foregoing, in no event shall a Change in Control be
deemed to have occurred (i) as a result of the formation of a Holding
Company, or (ii) with respect to a Participant, if Participant is part of a
"group," within the meaning of Section 13(d)(3) of the Exchange Act as in
effect on July 24, 1997, which consummates the Change in Control
transaction. In addition, for purposes of the definition of Change in
Control a Person engaged in business as an underwriter of securities shall
not be deemed to be the Beneficial Owner of, or to "beneficially own," any
securities acquired through such Person's
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participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
"Committee" means the Committee referred to in Section 2 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.
"Disability" means disability as determined under the disability plan
of the Company or Subsidiary of the Company applicable to the Participant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Person" means (i) the Company; (ii) any of the Company's
Subsidiaries; (iii) any Holding Company; (iv) any employee benefit plan of
the Company, any of its Subsidiaries or a Holding Company; or (v) any
Person organized, appointed or established by the Company, any of its
Subsidiaries or a Holding Company for or pursuant to the terms of any plan
described in clause (iv).
"Fair Market Value" means, as of any given date, the opening or
closing price, as determined by the Committee, 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 or closing price, as determined by the
Committee, of the Stock on said exchange on the last preceding day on which
such sale occurred.
"Holding Company" means an entity that becomes a holding company for
the Company or its businesses as a part of any reorganization, merger,
consolidation or other transaction, provided that the outstanding shares of
common stock of such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to vote generally in
the election of directors is, immediately after such reorganization,
merger, consolidation or other transaction, beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Voting Stock outstanding
immediately prior to such reorganization, merger, consolidation or other
transaction in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation or other
transaction, of such outstanding Voting Stock.
"Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422
of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Other Stock-Based Award" means an award under Section 8 below of
Stock or that is valued in whole or in part by reference to, or is
otherwise based on, Stock.
"Option Price" means the price specified in Section 5 below.
"Participant" means the recipient of an award under the Plan.
"Person" means an individual, corporation, partnership, association,
trust or any other entity or organization.
"Plan" means the 1989 Stock Incentive Plan of Delta Air Lines, Inc.,
as amended from time to time.
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"Restricted Stock" means Stock granted under an award pursuant to
Section 7 below which is subject to the restrictions specified therein.
"Retirement" means retirement from active employment with the Company
or any Subsidiary of the Company pursuant to the retirement or pension plan
of such entity applicable to the Participant.
"Stock" means the Common Stock, $3.00 par value, of the Company.
"Stock Appreciation Right" means a right granted under an award
pursuant to Section 6 below to receive an amount equal to the excess of the
Fair Market Value of the shares of Stock covered by such right over the
Option Price applicable to such shares, as specified in Section 6 below.
"Stock Option" or "Option" means any option to purchase shares of
Stock granted pursuant to Section 5 below.
"Subsidiary" of any Person means any other Person of which securities
or other ownership interests having voting power to elect a majority of the
board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by such Person.
"Voting Stock" means securities of the Company entitled to vote
generally in the election of members of the Board.
SECTION 2. Administration.
The Plan shall be administered by a Committee of the Board of Directors,
designated by the Board and to be comprised of not less than three members of
the Board. 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. Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to construe and interpret the Plan, to establish, amend and
rescind appropriate rules and regulations relating to the Plan, to determine the
persons to whom and the time or times at which to grant awards thereunder, to
administer the Plan, and to take all such steps and make all such determinations
in connection with the Plan and the awards granted thereunder as it may deem
necessary or advisable to carry out the provisions and intent of the Plan. All
determinations of the Committee shall be by a majority of its members, and its
determinations shall be final and conclusive for all purposes and upon all
persons, including but without limitation, the Company, the Committee, the
directors, officers and employees of the Company, the Participants and their
respective successors in interest.
Except as provided in the Plan, the Committee may make awards under
Sections 5, 6, 7 and 8 of this Plan either alone or in such combinations as it
deems appropriate, and awards need not be the same with respect to each
Participant. When granting Stock Options under Section 5 of this Plan, the
Committee shall designate the Stock Option as either an Incentive Stock Option
or a Non-Qualified Stock Option. The Committee shall also designate whether the
Stock Option is granted with Stock Appreciation Rights.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 6,000,000, which shall be increased to 9,800,000
effective January 1, 1998, subject to adjustment as provided in this Section.
Stock issued under the Plan may be either authorized and unissued shares or
treasury shares.
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The aggregate number of shares of Restricted Stock and non-performance
based Other Stock-Based Awards that may be granted on or after January 1, 1998,
under Sections 7 and 8 of this Plan, respectively, to all Participants under the
Plan shall not exceed 1,200,000 over the term of the Plan, subject to adjustment
as provided in this Section.
To the extent that any award under the Plan, or any portion thereof, is
settled in cash rather than in shares of Stock, the number of shares of Stock
subject to such award, less the number of shares of Stock issued, if any, in
connection with such settlement, shall again be available for distribution in
connection with future awards under the Plan. Subject to Section 6(d) below, if
any shares of Stock subject to a Stock Option cease to be subject to such Option
for any reason other than the exercise of such Option, or if any shares of Stock
subject to a Restricted Stock award or Other Stock-Based Award are forfeited or
any such award otherwise terminates, in whole or part, without a payment being
made to the Participant in the form of Stock, the shares of Stock previously
subject to such Option or award shall again be available for distribution in
connection with future awards under the Plan.
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 modifications, substitutions or adjustments as it deems necessary to
reflect such change so as to prevent the deletion or enlargement of rights,
including but not limited to, modifications, substitutions, or adjustments in
the aggregate number of shares reserved for issuance under the Plan, in the
number and Option Price of shares subject to outstanding Options or Stock
Appreciation Rights granted under the Plan, in the number of shares subject to
other outstanding awards granted under the Plan, and in any limitation on the
aggregate number of awards which may be granted under the Plan to any individual
Participant or to all Participants, provided that the number of shares subject
to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers and other key employees of the Company and its Subsidiaries who
are responsible for or contribute to the management, growth and/or profitability
of the Company and/or its Subsidiaries, as determined by the Committee, are
eligible to be granted awards under the Plan.
SECTION 5. Stock Options.
Award Limitation
For awards granted on or before December 31, 1997, the number of shares of
Stock subject to Stock Options that may be awarded to an individual Participant
under the Plan shall not exceed ten percent of the maximum total number of
shares of Stock reserved for distribution under Section 3 of the Plan. For
awards granted on or after January 1, 1998, the maximum number of shares of
Stock subject to Stock Options that may be awarded to an individual Participant
under the Plan shall not exceed 350,000 per calendar year.
Grant
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom Stock Options shall be
granted, the number of shares to be covered by each Stock Option and the
conditions and limitations, if any, in addition to those set forth in this
Section 5, applicable to such Stock Options. The Committee shall have the
authority to grant both Incentive Stock Options and Non-Qualified Stock Options.
In the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with the requirements of Section 422 of the Code,
as from time to time amended,
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and any implementing regulations. Each such award shall be confirmed by an
agreement executed by the Committee and the Participant, which agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of this Plan with respect to such award.
Unless otherwise determined by the Committee, each such agreement shall provide
that the Option (and any related Stock Appreciation Right) is not transferable
by the Participant otherwise than by will, by the laws of descent and
distribution, or by a written designation referred to in Section 10(c) below,
and is exercisable, during the Participant's lifetime, only by such Participant.
Option Price
The Committee shall establish the Option Price at the time each Stock
Option is granted, which price shall not be less than 100% of the Fair Market
Value of the Stock on the date of grant. 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 Section 3 hereof.
Exercise
The Committee shall determine when a Stock Option shall become exercisable,
and may provide that a Stock Option is exercisable in installments, provided
that no Stock Option shall be exercisable earlier than one (1) year or later
than ten (10) years after the date of grant, except that the one (1) year
limitation shall not apply: (a) if a Participant dies prior to one (1) year
after the date of grant, in which event the Option may be exercised as provided
in Section 10 hereof; (b) if the Participant's employment is terminated under
circumstances designated by the Committee in its discretion; or (c) if there
occurs a Change in Control.
The Option Price of each share as to which an Option is exercised shall be
paid in full at or before the time of settlement of such exercise. Such payment
shall be made in cash, or, subject to the consent of the Committee and to such
limitations as the Committee may impose, by tender of shares of unrestricted
Stock valued at Fair Market Value as of the date of exercise, or by a
combination of cash and shares of unrestricted Stock.
Incentive Stock Options
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify the Plan under Section 422 of the Code, or, without the consent
of the Participant(s) affected, to disqualify any Incentive Stock Option under
such Section 422.
To the extent permitted under Section 422 of the Code or the applicable
regulations thereunder or any applicable Internal Revenue Service pronouncement,
and subject to such terms and conditions as the Committee shall prescribe, any
Incentive Stock Option that does not continue to comply with the requirements of
the Code shall be treated as a Non-Qualified Stock Option.
SECTION 6. Stock Appreciation Rights.
Award Limitation
The maximum number of shares of Stock subject to Stock Appreciation Rights
that may be awarded to an individual Participant under the Plan shall not exceed
the limit specified in Section 5 of the Plan.
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Grant
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons who shall receive Stock Appreciation
Rights and the number of shares of Stock with respect to which each Stock
Appreciation Right is granted. Stock Appreciation Rights may be granted only in
conjunction with Stock Options granted under the Plan. Whenever Stock
Appreciation Rights are granted, they shall be provided for in the agreement
referred to in Section 5 above, or an amendment thereto.
A Stock Appreciation Right or applicable portion thereof granted in
conjunction with a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option, and a
Stock Option or applicable portion thereof granted in conjunction with a Stock
Appreciation Right shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Appreciation Right.
Terms and Conditions
Stock Appreciation Rights shall be exercisable in accordance with
procedures established by the Committee and shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee, in addition to the following:
(a) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5 of the
Plan.
(b) Upon the exercise of a Stock Appreciation Right, a Participant
shall be entitled to receive an amount in cash or shares of Stock or a
combination thereof, as determined by the Committee, equal in value to the
excess of the Fair Market Value of one share of Stock over the Option Price
per share specified in the related Stock Option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised. The Fair Market Value used to determine the amount payable (and
the number of shares payable to the extent that the payment is in the form
of Stock) shall be the Fair Market Value on the last trading day preceding
the date of exercise of the Stock Appreciation Right or, if so specified by
the Committee, the highest Fair Market Value during the applicable period
referred to in the related award agreement, in which the Stock Appreciation
Right is exercised.
(c) Stock Appreciation Rights shall be transferable only when and to
the extent that the related Stock Option would be transferable under
Section 5 of the Plan.
(d) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares actually
issued, if any, upon the exercise of the Stock Appreciation Right.
SECTION 7. Restricted Stock.
Award Limitation
The maximum number of shares of Restricted Stock that may be awarded under
Section 7 of the Plan to an individual Participant under the Plan is 200,000 per
calendar year.
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Grant
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient of Restricted Stock, the
time or times within which such awards may be subject to forfeiture, and all
other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the Committee
may determine, in its sole discretion.
Each Restricted Stock award shall be confirmed by an agreement executed by
the Committee and the Participant, which agreement shall contain such provisions
as the Committee determines to be necessary or appropriate to carry out the
intent of this Plan with respect to such award.
Each Participant receiving a Restricted Stock award shall be issued a Stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
The Committee shall require that Stock certificates evidencing such shares
be held by the Company until the restrictions thereon shall have lapsed, and
that, as a condition of any Restricted Stock award, the Participant shall have
delivered to the Company a stock power, endorsed in blank, relating to the Stock
covered by such award.
Restrictions and Conditions
The shares of Restricted Stock awarded pursuant to this Section 7 shall be
subject to the following restrictions and conditions:
(a) During a period set by the Committee commencing with the date of
such award (the "Restriction Period"), the Participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments
and may accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the Committee
may determine.
(b) Except as provided in this paragraph (b) and paragraph (a) above,
the Participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a shareholder of the Company, including the right to
vote the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time of award, may
provide that the payment of cash dividends shall or may be deferred and, if
the Committee so determines, reinvested in additional shares of Stock or
Restricted Stock to the extent shares are available under Section 3, or
otherwise reinvested. Pursuant to Section 3 above, Stock dividends issued
with respect to Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and other terms
and conditions that apply to the shares with respect to which such
dividends are issued.
(c) Upon termination of a Participant's employment with the Company or
any Subsidiary of the Company for any reason during the Restriction Period,
all shares still subject to restriction will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee in
the award agreement.
A-8
<PAGE> 43
(d) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares of Stock
shall be delivered promptly to the Participant, and the certificates for
the shares of Restricted Stock shall be cancelled.
SECTION 8. Other Stock-Based Awards.
Award Limitation
The maximum number of shares of Stock subject to Other Stock-Based Awards
that may be awarded under Section 8 of the Plan to an individual Participant
under the Plan is 200,000 per calendar year.
Grant
Other Stock-Based Awards may be granted either alone or in addition to or
in conjunction with other awards under this Plan. Awards under this section may
include, but are not limited to, the grant of Stock upon the continued
employment of a Participant for a specified period of time, the payment of cash
or Stock based upon the performance of the Stock or other criteria, or the grant
of securities convertible into Stock.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which such awards shall be made, the number of shares of Stock or other
securities, if any, to be granted pursuant to such awards, and all other
conditions of the awards. Any such award shall be subject to an agreement
between the Company and the Participant.
Each Other Stock-Based Award shall be confirmed by an agreement executed by
the Committee and the Participant, which agreement shall contain such provisions
as the Committee determines to be necessary or appropriate to carry out the
intent of this Plan with respect to such award.
Performance-Based Awards
The Committee may, in its discretion, grant Other Stock-Based Awards to a
Participant with the intent that such awards qualify as "performance-based
compensation" under Section 162(m) of the Code. These awards may consist of
Performance Units or Performance Shares.
A Performance Unit is a right, denominated in cash or cash units, to
receive, at a specified future date, payment in cash or Stock, as determined by
the Committee, of an amount which is to be determined based on the extent to
which specified performance goals are satisfied. At the time of granting the
awards, the Committee, in the award agreement or by other Plan rules, shall
determine the base value of the unit, the performance factors applicable to the
determination of the ultimate payment value of the Performance Unit as set forth
below and the period over which performance will be measured.
A Performance Share is a right, granted in the form of Stock or stock units
equivalent to Stock, to receive, at a specified future date, payment in cash or
Stock, as determined by the Committee, of an amount which is to be determined
based on the extent to which specified performance goals are satisfied. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a share of Stock on the date of grant. At the time of granting the awards, the
Committee, in the award agreement or by other Plan rules, shall determine the
performance factors applicable to the number of Performance Shares to be earned
as set forth below and the period over which performance will be measured.
A-9
<PAGE> 44
The performance factors selected by the Committee in respect of Performance
Units and Performance Shares shall be based on any one or more of the following:
total shareholder return; return on equity, assets, capital or investment;
operating, pre-tax or after-tax profit levels expressed in either absolute
dollars, earnings per share, or increases of the same; revenues or revenue
growth; Stock price; cash flow; economic or cash value added; 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, a Subsidiary of the
Company, or a division or unit of any of the foregoing, or based on comparisons
of any of the performance measures relative to other companies. These factors
shall have a minimum performance standard below which no amount will be paid, a
target performance standard and a maximum performance standard above which no
additional payments will be made. The applicable performance period shall not
exceed 10 years.
Prior to payment of any performance-based award intended to qualify under
Section 162(m) of the Code, the Committee shall certify in writing that the
performance goals and any other material terms of the award were in fact
satisfied, all in a manner consistent with the applicable regulations under
Section 162(m) of the Code.
Performance-based awards may be paid in a lump sum or in installments
following the close of the performance period or, in accordance with procedures
established by the Committee, on a deferred basis.
Terms and Conditions
In addition to the terms and conditions specified in the award agreement,
Other Stock-Based Awards made pursuant to this Section 8 shall be subject to the
following:
(a) Unless otherwise determined by the Committee, any shares of Stock
subject to awards made under this Section 8 may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses.
(b) If specified by the Committee in the award agreement, the
recipient of an award under this Section 8 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or dividend
equivalents with respect to the Stock or other securities covered by the
award, and the Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional Stock or otherwise reinvested.
(c) The award agreement with respect to any Other Stock-Based Award
shall contain provisions dealing with the disposition of such award in the
event of a termination of the Participant's employment prior to the
exercise, realization or payment of such award, whether such termination
occurs because of Retirement, Disability, death or other reason, with such
provisions to take account of the specific nature and purpose of the award.
SECTION 9. Change in Control.
Upon the occurrence of a Change in Control:
(a) All outstanding Stock Options and Stock Appreciation Rights shall
become immediately vested, exercisable and nonforfeitable and shall remain
vested, exercisable and nonforfeitable during their remaining terms.
A-10
<PAGE> 45
(b) Any Restriction Period and other restrictions imposed on
outstanding non-performance based Restricted Stock and Other Stock-Based
Awards shall lapse.
(c) Each outstanding award of performance-based Restricted Stock and
Other Stock-Based Awards shall be paid in an amount equal to the greater of
(i) the actual award payable to the Participant for the applicable
performance period, calculated as if the performance period had ended on
the date of the Change in Control, and (ii) the target award payable to
Participant for that performance period, in each case prorated to reflect
the portion of the performance period elapsed through the date of the
Change in Control. The applicable amount shall be paid in the form of cash
or Stock, in accordance with the terms of the applicable award agreement,
promptly after the Change in Control.
SECTION 10. Termination of Employment, Retirement, Disability, Death and
Voluntary Demotion.
Unless otherwise determined by the Committee, the following shall apply to
awards under Sections 5 and 6 of the Plan:
(a) If a Participant's employment shall be terminated by the Company
or a Subsidiary of the Company, or if a Participant resigns from employment
with the Company or a Subsidiary of the Company, the Stock Options or Stock
Appreciation Rights held by such Participant shall be forfeited unless the
Committee authorizes the exercise of such Stock Options or Stock
Appreciation Rights, provided that any such exercise shall be permissible
only for a period of up to four (4) months following such termination or
resignation and only if such exercise is otherwise permissible under the
Plan and the applicable award agreement.
(b) With respect to awards made prior to October 28, 1993, a
Participant whose employment is terminated because of his Retirement or
Disability shall be treated as though he remains in active employment,
unless the applicable award agreement is amended to shorten the exercise
period following Retirement or Disability. With respect to awards made on
or after October 28, 1993, a Participant whose employment is terminated
because of his Retirement or Disability may exercise his outstanding Stock
Options or Stock Appreciation Rights only during the shorter of the
exercise period remaining under the applicable award agreement or the three
years after such Retirement or Disability. In the case of an exercise under
either of the two preceding sentences, such exercise must otherwise comply
with the Plan and the applicable award agreement. Notwithstanding the
preceding sentences, however, if a Participant's employment is terminated
because of Retirement prior to his normal retirement date (as determined
under the retirement or pension plan of the Company or Subsidiary of the
Company applicable to the Participant) and, within two years after such
early Retirement and without the Committee's approval, such Participant
directly or indirectly provides management or executive services (whether
as a consultant, advisor, officer or director) to any Person who is in
direct and substantial competition with the air transportation business of
the Company or its Subsidiaries, then such Participant shall immediately
forfeit any Stock Options and Stock Appreciation Rights held by him.
Because of the broad and extensive scope of the Company's air
transportation business, the restrictions contained in this provision are
intended to extend to management or executive services which are directly
related to the provision of air transportation services into, within, or
from the United States, as no smaller geographical restriction will
adequately protect the legitimate business interests of the Company.
(c) With respect to awards made prior to October 28, 1993, in the
event of the death of a Participant while employed by the Company or a
Subsidiary of the Company or while covered by Section 10(b) above, such
Participant's Stock Options or Stock Appreciation Rights may only be
exercised within one
A-11
<PAGE> 46
year after the Participant's death, unless the applicable award agreement
is amended to provide a maximum exercise period of up to three years as
described in the next sentence. With respect to awards made on or after
October 28, 1993, in the event of the death of a Participant while employed
by the Company or a Subsidiary of the Company, such Participant's Stock
Options or Stock Appreciation Rights may be exercised only within the
shorter of the exercise period remaining under the applicable award
agreement or the three years after the Participant's death. In the case of
an exercise under either of the two preceding sentences, such exercise may
be made by the person or persons named in a written designation by the
Participant delivered to and approved by the Committee, or if there is no
such approved 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, however, that such exercise must otherwise comply with the Plan
and the applicable award agreement.
(d) In the event that prior to or after the time that a Stock Option
or Stock Appreciation Right first becomes exercisable, a Participant either
voluntarily suggests and later accepts a demotion, or is involuntarily
demoted, to a job involving lesser responsibilities than those of the job
held by the Participant at the time of an award hereunder, the Committee
may in its sole discretion, not later than six months from the date of the
demotion, revoke or modify such award in any manner as it deems appropriate
under the circumstances. The Committee shall determine in its sole
discretion what constitutes a demotion to a job involving lesser
responsibilities for purposes of this Section 10(d).
(e) Notwithstanding anything in Section 10(a)-(d) above to the
contrary, if a Participant resigns from employment with the Company and
coincident with such resignation becomes an employee of WORLDSPAN L.P.
("WORLDSPAN") or of TransQuest, such Participant shall be treated as though
he remains in active employment with the Company with respect to Stock
Options and Stock Appreciation Rights outstanding at the time of such
resignation; provided, however, that, after becoming an employee of
WORLDSPAN or TransQuest coincident with his resignation from the Company:
(i) If a Participant's employment is terminated by WORLDSPAN or
TransQuest, or if a Participant resigns from employment with WORLDSPAN
or TransQuest (other than if such Participant becomes an employee of the
Company or a Subsidiary of the Company coincident with his resignation
from WORLDSPAN or TransQuest), the Stock Options or Stock Appreciation
Rights held by such Participant shall be forfeited unless the Committee
authorizes the exercise of such Stock Options or Stock Appreciation
Rights, provided that any such exercise shall be permissible only for a
period of up to four (4) months following such termination or
resignation and only if such exercise is otherwise permissible under the
Plan and the applicable award agreement; and provided further that if a
Participant resigns from WORLDSPAN or TransQuest and coincident with
such resignation becomes an employee of the Company or a Subsidiary of
the Company, such Participant shall, subject to Sections 10(a)-(d)
above, be treated as in active employment with the Company.
(ii) If a Participant's employment with WORLDSPAN or TransQuest is
terminated because of his retirement or disability under WORLDSPAN's or
TransQuest's retirement or disability plan applicable to such
Participant, such Participant's Stock Options or Stock Appreciation
Rights may only be exercised during the shorter of the exercise period
remaining under the applicable award agreement or the three years after
such retirement or disability; provided, however, that such exercise
must otherwise comply with the Plan and the applicable award agreement.
Notwithstanding the preceding sentence, however, if a Participant's
employment is terminated because of retirement
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<PAGE> 47
prior to his normal retirement date (as determined under WORLDSPAN's or
TransQuest's retirement or pension plan applicable to the Participant)
and, within two years after such early retirement and without the
Committee's approval, such Participant directly or indirectly provides
management or executive services (whether as a consultant, advisor,
officer or director) to any Person who is in direct and substantial
competition with the air transportation business of the Company or its
Subsidiaries, then such Participant shall immediately forfeit any Stock
Options and Stock Appreciation Rights held by him. Because of the broad
and extensive scope of the Company's air transportation business, the
restrictions contained in this provision are intended to extend to
management or executive services which are directly related to the
provision of air transportation services into, within, or from the
United States, as no smaller geographical restriction will adequately
protect the legitimate business interests of the Company.
(iii) If a Participant dies while employed by WORLDSPAN or
TransQuest or while covered by Section 10(e)(ii) above, such
Participant's Stock Options or Stock Appreciation Rights may only be
exercised within the shorter of the exercise period remaining under the
applicable award agreement or the three years after the Participant's
death by the person or persons named in a written designation by the
Participant delivered to and approved by the Committee, or if there is
no such approved 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, however, that such exercise must otherwise comply
with the Plan and the applicable award agreement.
(iv) If prior to the time that a Stock Option or Stock Appreciation
Right is exercisable, a Participant voluntarily suggests and later
accepts a demotion to a job involving lesser responsibilities than those
of the job held by the Participant at the time of first becoming an
employee of WORLDSPAN or TransQuest, the Committee in its sole
discretion may revoke or modify such award as it deems appropriate under
the circumstances.
SECTION 11. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of a
Participant under a Stock Option, Stock Appreciation Right, Restricted Stock
award, or Other Stock-Based Award theretofore granted, without the Participant's
consent, or which, without the approval of the Company's stockholders, would
cause the Plan not to continue to comply with Rule 16b-3 under the Exchange Act,
or any successor to such Rule.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, including but not limited to extending the time during
which awards granted prior to October 28, 1993 may be exercised to the full
period of time permitted by the Plan; provided, however, that, subject to
Section 3 above, no such amendment shall impair the rights of any Participant
without the Participant's consent, except as provided in Section 10(d) above.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 12. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option, Stock Appreciation Right or other award under the Plan to
represent to and agree with the Company in writing that
A-13
<PAGE> 48
such person is acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate references to such restrictions. Except as
otherwise provided in the Plan, Participants shall have no rights as
stockholders of Stock covered by an award prior to the issuance of a Stock
certificate to such Participant.
(b) 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.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary of the Company any right to continued employment with
the Company or a Subsidiary of the Company, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary of the
Company to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for Federal income tax purposes with
respect to any award under the Plan, the Participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. Subject to the consent of the Committee and to such
limitations as the Committee may impose, withholding obligations may be settled
with Stock, including Stock that is part of the award that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditioned on such payment or arrangements and the Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.
(e) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Georgia.
(f) Agreements with respect to awards pursuant to the Plan may contain, in
addition to terms and conditions prescribed in the Plan, such other terms and
conditions as the Committee may deem appropriate provided such terms and
conditions are not inconsistent with the provisions of the Plan.
SECTION 13. Effective Date of Plan.
The Plan as originally adopted was approved by the stockholders of the
Company and became effective as of January 1, 1989.
SECTION 14. Term of Plan.
No Stock Option, Stock Appreciation Right, Restricted Stock award or Other
Stock-Based Award shall be granted pursuant to the Plan on or after January 1,
2004, but awards granted prior to January 1, 2004 may extend beyond that date.
A-14
<PAGE> 49
APPENDIX B
[DELTA AIR LINES LOGO] PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 23, 1997, OR ANY ADJOURNMENTS
THEREOF. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER(S).
The undersigned hereby appoints Mary Johnston Evans, Gerald Grinstein and Jesse
Hill, Jr., jointly and severally with full power of substitution to each, or,
instead of any of 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
Centre/Atrium, 2001 Louisville Avenue, Monroe, Louisiana, on Thursday, October
23, 1997, at 9:00 a.m., local time, or any adjournments thereof, and to vote as
directed below all stock of this Company which 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 10 NOMINEES FOR
DIRECTOR, FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS FOR FISCAL YEAR 1998, FOR APPROVAL OF THE 1989 STOCK
INCENTIVE PLAN, AS AMENDED, AND AGAINST PROPOSALS 4 AND 5, 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 15, 1997, RECEIPT OF WHICH IS
ACKNOWLEDGED. THIS PROXY, IF PROPERLY EXECUTED AND DELIVERED, WILL REVOKE ALL
PRIOR PROXIES.
NOMINEES FOR DIRECTOR:
Edwin L. Artzt, Henry A. Biedenharn, III, James L. Broadhead, Edward H. Budd, R.
Eugene Cartledge, Mary Johnston Evans, Gerald Grinstein, Jesse Hill, Jr., Leo F.
Mullin 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> 50
[X] Please mark your 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 and 3, and
AGAINST Proposals 4 and 5.
The Board of Directors recommends a vote FOR all nominees and FOR Proposals 2
and 3.
FOR WITHHOLD
1. Election of Directors. [ ] [ ]
(SEE REVERSE)
Withhold authority to vote for the
following nominee(s) only:
------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the [ ] [ ] [ ]
appointment of Arthur
Andersen LLP as independent
auditors for fiscal year 1998.
3. PROPOSAL to approve the 1989 Stock [ ] [ ] [ ]
Incentive Plan, as amended.
The Board of Directors recommends a vote AGAINST Proposals 4 and 5.
FOR AGAINST ABSTAIN
4. PROPOSAL by a stockholder relating [ ] [ ] [ ]
to the location of future Annual
Meetings of Stockholders.
5. PROPOSAL by a stockholder relating [ ] [ ] [ ]
to employment matters.
I plan to attend the Annual Meeting [ ]
of Stockholders.
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 23, 1997
HOLIDAY INN PROFESSIONAL CENTRE/ATRIUM
2001 LOUISVILLE AVENUE
MONROE, LOUISIANA 71201
9:00 A.M.
<PAGE> 51
[Delta Air Lines Logo]
INTERNAL MEMORANDUM
DATE: September 15, 1997
TO: Delta Family-Care Savings Plan Participants
FROM: President and Chief Executive Officer
SUBJECT: DELTA'S 1997 ANNUAL MEETING OF STOCKHOLDERS
Enclosed are the 1997 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" the election of all 10
nominees for Director, "FOR" Proposals 2 and 3, and "AGAINST" Proposals 4 and
5, 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/ Leo F. Mullin
-----------------
Leo F. Mullin
DETACH AND RETURN VOTING INSTRUCTION FORM
- --------------------------------------------------------------------------------
DELTA FAMILY-CARE SAVINGS PLAN
VOTING INSTRUCTION FORM 1997
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND FOR PROPOSALS
2 AND 3.
PLEASE VOTE BY FILLING IN THE BOXES BELOW.
1. Election of Directors FOR ALL nominees __________
(except as indicated below).
WITHHOLD AUTHORITY to vote __________
for all nominees listed below.
NOMINEES FOR DIRECTOR:
Edwin L. Artzt, Henry A. Biedenharn, III, James L. Broadhead, Edward H. Budd, R.
Eugene Cartledge, Mary Johnston Evans, Gerald Grinstein, Jesse Hill, Jr., Leo F.
Mullin 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 1998. _____ _____ _____
3. PROPOSAL to approve the 1989 Stock
Incentive Plan, as amended. _____ _____ _____
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4 AND 5.
4. PROPOSAL by a stockholder relating to
the location of future Annual Meetings
of Stockholders. _____ _____ _____
5. PROPOSAL by a stockholder relating to
employment matters. _____ _____ _____
I PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS. YES _____ NO _____
<PAGE> 52
DELTA AIR LINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 23, 1997, 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 1997 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
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 Savings 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 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 23, 1997, 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 15, 1997.
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:_________________________________, 1997
____________________________________________
____________________________________________
SIGNATURE(S)
