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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
Delta Air Lines, Inc.
General Offices
Hartsfield Atlanta
International Airport
Post Office Box 20706
Atlanta, Georgia 30320-6001
To Our Shareowners:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the 1998 Annual Meeting of Shareowners of Delta Air Lines, Inc. The
meeting will be held at The Waldorf-Astoria, 301 Park Avenue, New York, New York
10022, on Thursday, October 22, 1998, at 9:00 a.m., local time. The purpose of
the meeting is to act on the matters listed in the attached Notice and to report
on the Company's activities during fiscal 1998. There will be an opportunity to
discuss matters of interest to you as a shareowner.
Please let us know whether you plan to attend the meeting by marking the
appropriate box on your proxy card. If you use our new telephone or internet
voting system, please indicate your plans when prompted. If you are a shareowner
of record, you should bring the enclosed admission ticket to the meeting. If you
are planning to attend the meeting and your shares are held in street name (by a
bank or broker, for example), you should ask the record owner for a legal proxy
or bring your most recent account statement to the meeting so that we can verify
your ownership of Delta stock.
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.
Your vote is important. We encourage you to sign and return your proxy card
in the enclosed envelope, or to use our new telephone or internet voting system,
to ensure that your shares are represented at the meeting.
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 16, 1998
<PAGE>
[LOGO]
Delta Air Lines, Inc.
General Offices
Hartsfield Atlanta
International Airport
Post Office Box 20706
Atlanta, Georgia 30320-6001
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
To the Shareowners of Delta Air Lines, Inc.:
The Annual Meeting of Shareowners of Delta Air Lines, Inc. ("Annual
Meeting") will be held at The Waldorf-Astoria, 301 Park Avenue, New York, New
York 10022, on Thursday, October 22, 1998, 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 1999.
3. The proposed amendment to Article Fourth of the Certificate of
Incorporation to increase the authorized Common Stock of the Company from
150 million shares, par value $3.00 per share, to 450 million shares, par
value $1.50 per share, and to effect a two-for-one split of the issued
Common Stock of the Company.
4. The shareowner proposal relating to cumulative voting for directors,
if the proposal is presented at the meeting.
5. The shareowner proposal relating to the CERES Principles for Public
Environmental Accountability, if the proposal is presented at the meeting.
6. Such other matters as may properly come before the Annual Meeting.
The close of business on August 31, 1998, has been fixed as the record date
for determination of shareowners entitled to notice of, and to vote at, the
Annual Meeting. During the ten-day period preceding the meeting, a list of
shareowners entitled to vote at the Annual Meeting will be maintained at the
offices of First Chicago NBD Corporation, 153 W. 51st Street, New York, New York
10019. 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 16, 1998
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DELTA AIR LINES, INC.
GENERAL OFFICES
HARTSFIELD ATLANTA INTERNATIONAL AIRPORT
POST OFFICE BOX 20706
ATLANTA, GEORGIA 30320-6001
PROXY STATEMENT
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ANNUAL MEETING OF SHAREOWNERS
TO BE HELD OCTOBER 22, 1998
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 1998 Annual Meeting of Shareowners ("Annual
Meeting"). The Annual Meeting will be held at The Waldorf-Astoria, 301 Park
Avenue, New York, New York 10022, on Thursday, October 22, 1998, at 9:00 a.m.,
local time. The proxies may also be voted at any adjournment of the Annual
Meeting. The approximate date of mailing of this proxy statement and the
accompanying proxy card is September 16, 1998.
VOTING PROCEDURES
VOTING STOCK
The Board of Directors set August 31, 1998, as the record date for the
determination of shareowners entitled to notice of, and to vote at, the Annual
Meeting. On the record date, there were outstanding 73,482,933 shares of common
stock, par value $3 per share ("Common Stock"), and 6,596,638 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 its
holder 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. In addition, the Common Stock will vote separately as a
class on the proposal to amend Article Fourth of the Certificate of
Incorporation.
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.
VOTING BY PROXY
GENERAL INFORMATION
All properly executed written proxy cards, and all properly completed
proxies voted by telephone or the internet, which are delivered pursuant to this
solicitation (and not later revoked) will be voted at the meeting in accordance
with the instructions given in the proxy. If a written proxy card is signed by a
registered shareowner 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 1999; (3) "FOR" the proposed amendment to Article
Fourth of the Certificate of Incorporation; (4) "AGAINST" the shareowner
proposal relating to cumulative voting for directors; and (5) "AGAINST" the
shareowner proposal relating to the CERES Principles for Public Environmental
Accountability.
Voting your proxy by mail, telephone or the internet will not limit your
right to vote at the Annual Meeting if you later decide to attend in person. If
your shares are held in the name of a broker, bank or
<PAGE>
other record holder, you must either direct the record holder as to how to vote
your shares or obtain a proxy from the record holder to vote at the Annual
Meeting.
VOTING BY WRITTEN PROXY CARD
If a shareowner is a corporation or partnership, the accompanying proxy card
must be signed in the full corporate or partnership name by a duly authorized
person. If the proxy card is signed pursuant to a power of attorney or by an
executor, administrator, trustee or guardian, the signer's full title must be
given and a certificate or other evidence of appointment must be furnished. If
shares are owned jointly, each joint owner must sign the proxy card.
VOTING BY TELEPHONE OR THE INTERNET
Instructions for a shareowner of record to vote by telephone or the internet
are set forth on the enclosed admission ticket attached to the proxy card. The
telephone and internet voting procedures are designed to authenticate votes cast
by use of a personal identification number. The procedures, which comply with
Delaware law, allow shareowners to appoint a proxy to vote their shares and to
confirm that their instructions have been properly recorded.
REVOKING A PROXY
A proxy given pursuant to this solicitation may be revoked by the
shareowner, at any time prior to the voting of the proxy, by written notice to
the Secretary of the Company, by a later-dated vote by proxy either signed and
returned by mail or by using the telephone or internet voting procedures, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in and of itself constitute a revocation of a proxy.
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
shareowner proposal relating to cumulative voting for directors; and (4) to
approve the shareowner proposal relating to the CERES Principles for Public
Environmental Accountability. 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 proposals will not be included in calculating the
number of votes necessary for approval.
The proposed amendment to Article Fourth of the Certificate of Incorporation
requires the approval of a majority of the votes entitled to be cast by the
holders of all outstanding shares of (1) Common Stock and ESOP Preferred Stock
voting together as a single class; and (2) Common Stock voting as a separate
class. Abstentions and broker non-votes on this proposal will have the same
effect as negative votes.
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GENERAL INFORMATION
BOARD OF DIRECTORS
The Board of Directors is responsible for establishing broad corporate
policies and for the overall performance of the Company. Members of the Board
receive information about the Company's business through 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 six times per year and special
meetings are scheduled when required. The Board held 14 meetings in fiscal 1998.
COMMITTEES ESTABLISHED BY THE BOARD
The Committees established by the Board of Directors to assist it in
discharging 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, conduct and results of the audits
conducted by the independent auditors, 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 four non-
employee directors, met five times in fiscal 1998.
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 four non-employee directors, met four times in
fiscal 1998.
The Corporate Governance Committee reviews 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. The Committee, which
consists of four non-employee directors, met four times in fiscal 1998.
The Corporate Governance Committee also recommends to the Board candidates
for election as directors, and will consider nominees recommended by
shareowners. Shareowner recommendations should be submitted in writing to the
Secretary of the Company with a description of the proposed nominee's
qualifications and other relevant biographical information, as well as the
nominee's consent to serve as a director. See "Submission of Shareowner
Proposals and Nominations" on page 33 of this proxy statement.
The Corporate Strategy Committee, which was established in October 1997,
reviews the Company's long-term strategic goals, objectives and plans, and makes
recommendations to management and the Board of Directors on these subjects. The
Committee, which consists of four non-employee directors, met once in fiscal
1998.
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings. The Committee, which consists of the chairmen of each of
the Board's committees, did not meet in fiscal 1998.
The Finance Committee reviews the Company's financial planning and financial
structure, funds requirements, and borrowing and dividend policies. The
Committee, which consists of four non-employee directors, met four times in
fiscal 1998.
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The Personnel & Compensation Committee reviews and makes 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 officers above the level of Senior Vice
President except the Chief Executive Officer, and administers the Company's
Incentive Compensation Plan and 1989 Stock Incentive Plan. The Committee, which
consists of four non-employee directors, met six times in fiscal 1998.
CORPORATE GOVERNANCE POLICIES
The Board of Directors believes that sound corporate governance practices
provide an important framework to assist the Board in fulfilling its
responsibilities. Accordingly, in August 1998, the Board formally adopted
corporate governance principles relating to its functions, structure and
operations. These principles, which the Board intends to review periodically,
are set forth below.
BOARD FUNCTIONS
1. Chief Executive Officer Evaluation. The Board will evaluate the
performance of the Chief Executive Officer at least annually. Each outside
(non-management) director will complete an assessment, and the Chief Executive
Officer will complete a self-assessment, of the Chief Executive Officer's
performance in specified categories such as strategic planning, financial
matters and leadership. The outside directors will meet in executive session,
with and without the Chief Executive Officer, to discuss these assessments.
The evaluation will be based on objective criteria which shall include,
among other factors, corporate performance, development of management, and the
accomplishment of annual objectives and long-term strategic goals.
2. Approval of Major Strategies and Financial Objectives. Each year the
Board will review and approve the Company's one-year business plan, as well as
its long-term strategic plan, aircraft fleet plan and financial goals. The Board
will regularly monitor the Company's performance with respect to these plans and
goals.
3. Board Evaluation. The Board will annually evaluate the effectiveness of
the Board and its Committees. Each director will complete a written assessment
of the Board's performance in specified categories such as fiduciary oversight;
Board governance and process; strategic planning and business decisions; and
financial matters. The Board will meet in executive session to discuss these
assessments. The purpose of this evaluation is to increase the effectiveness of
the Board as a whole, as well as its individual members.
4. Selection of Board Members. The Board has the responsibility for
nominating directors. In nominating a slate of directors, the Board's objective
is to select individuals with skills and experience which can be of assistance
to management in operating the Company's business. The Board will consider
business experience, diversity, skills, international background and other
matters which are relevant to this objective. Each director should devote the
time and attention necessary to fulfill the obligations of a director.
5. Management Succession. The Board will review annually with the Chief
Executive Officer management succession planning and development. There should
also be available, on a continuing basis, the Chief Executive Officer's
recommendation as to his successor should he be unexpectedly disabled.
4
<PAGE>
6. Executive Compensation. The Company's executive compensation program
will be designed and administered with clear and strong linkages to its business
strategy and long-term goals, particularly the creation of shareowner value, to
develop talented executives and motivate them to work for the long-term
advantage of the Company's primary stakeholder groups.
7. Director Compensation. The Board will periodically review director
compensation in comparison with companies that are similarly situated to ensure
that such compensation is reasonable and competitive.
8. Board Interaction with Institutional Investors, the Press, Customers,
etc. The Board believes that management speaks for the Company. Individual
Board members may, from time to time, meet or otherwise communicate with various
constituencies that are involved with the Company. However, it is expected that
Board members will speak for the Company only with the knowledge of management
and, in most instances, at the request of management.
BOARD STRUCTURE
1. Number of Directors. The Board will normally consist of between nine and
eleven members, although the Board is willing to increase its size to
accommodate the availability of an outstanding candidate.
2. Independence. A substantial majority of the directors will be outside
directors who have no significant financial or personal tie to the Company,
other than Common Stock ownership and entitlement to directors' fees.
3. Board Leadership. The Board does not have a policy on whether the role
of the Chief Executive Officer and the Chairman should be separate. When the
Chief Executive Officer holds the position of Chairman of the Board, the Board
will consider the election of an outside director to chair the executive
sessions of the Board which are not attended by the Chief Executive Officer and
to have such other duties as the Board deems appropriate.
4. Committees of the Board. The Board, in consultation with the Chief
Executive Officer, will determine the responsibilities and membership of its
Committees. Each Committee, other than the Executive Committee, will consist
solely of outside directors. The Committee Chairman, in consultation with
Committee members, will determine the frequency and length of the meetings of
the Committee.
5. Retirement/Resignation and Term Limits. No director may stand for
reelection after age 70. A director is expected to offer to submit his or her
resignation when the director no longer holds the principal occupation he or she
held at the time of election to the Board. Directors who are full-time employees
of the Company shall resign from the Board coincident with their retirement from
full-time employment.
The Board does not believe it should establish term limits for directors.
While term limits could help ensure that there are fresh ideas and viewpoints
available to the Board, term limits have the disadvantage of losing the
contribution of directors who have been able to develop, over a period of time,
increasing insight into the Company and its operations, and who therefore
provide an increasing contribution to the Board.
6. Stock Ownership. Directors are encouraged to own a significant equity
interest in the Company within a reasonable period after initial election to the
Board. To more closely align the interests of directors and the Company's
shareowners, a portion of directors' fees will be paid in the form of Common
Stock.
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BOARD OPERATIONS
1. Number of Meetings. The Board will meet as frequently as needed for
directors to discharge properly their responsibilities. Regular meetings of the
Board are held six times per year and special meetings are held as required.
2. Conduct of Meetings. Board meetings will be conducted in a manner which
ensures open communication, meaningful participation and timely resolution of
issues. Whenever feasible, directors will receive materials concerning matters
to be acted upon well in advance of the applicable meeting.
3. Executive Sessions. The Board will hold executive sessions at least
twice a year without the Chief Executive Officer or any other inside directors.
4. Board Access to Senior Management. Board members have complete access to
the Company's senior management. It is assumed that Board members will use
judgment to be sure that contact with management is not distracting to the
business operations of the Company and that the Chief Executive Officer is
appropriately informed.
5. Senior Management Service on Outside Boards. Members of senior
management should review proposed outside Board memberships with the Corporate
Governance Committee, and outside Board memberships ordinarily should be limited
to three.
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, of which $5,000 is paid in shares of Common Stock; and a meeting fee of
$1,000 plus expenses for each Board and Committee meeting attended. The Chairmen
of each of the 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
certain of the investment return choices available under the Savings Plan,
including a fund invested primarily in Common Stock (the "Delta Common Stock
Fund").
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 Savings Plan, and will be paid to the director after he completes his
service as a member of the Board.
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Lifetime advisory directors, and directors who retire from the Board at
their mandatory retirement age, are eligible during their lifetime for
complimentary transportation privileges on Delta for themselves and their
spouses.
In May 1997, the Board of Directors established a search committee,
consisting of Messrs. Artzt, Cartledge and Grinstein, to conduct a search for a
new chief executive officer of the Company, and to recommend one or more
candidates for this position to the Board. For their services on the search
committee, Messrs. Artzt, Cartledge and Grinstein received $7,000, $6,000 and
$11,000, respectively. These amounts are based on the number of interviews and
other search committee activities in which each member participated.
On October 23, 1997, the Board of Directors granted Mr. Grinstein 3,500
shares of Common Stock and related dividend equivalents which are reinvested in
additional shares of Common Stock at current market prices. This award is in
recognition of Mr. Grinstein's valuable service to the Company on various
matters, including the Company's hiring of Mr. Mullin; the Company's review of
its strategic alternatives; and Mr. Grinstein's service as non-executive
Chairman of the Board and his agreement to continue to serve in that capacity
during fiscal 1998. The shares of Common Stock will be issued to Mr. Grinstein
after he completes his Board service. On October 23, 1997, the closing price of
the Common Stock on the New York Stock Exchange was $106.875.
CHARITABLE AWARD PROGRAM
The Company's charitable contribution program permits an eligible 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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PROPOSAL 1
ELECTION OF DIRECTORS
A Board of nine 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, Leo F.
Mullin and Andrew J. Young.
All of the nominees were elected by the shareowners at the last annual
meeting of shareowners. During fiscal 1998, each nominee attended at least 75%
of the meetings of the Board of Directors and the Committees on which he or she
served.
The Company's By-Laws establish mandatory retirement ages for directors.
Pursuant to these provisions, Mr. Jesse Hill, Jr. will retire from the Board of
Directors on October 22, 1998. Mr. Hill, who has been a director of the Company
since 1975, is Chairman of the Benefit Funds Investment Committee, and a member
of the Audit Committee and the Executive Committee.
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, banking, consumer products, government and international
affairs, insurance, international trade, 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, is Chairman of
the Finance Committee, and is a member of the Corporate Strategy Committee and
the Executive Committee. Mr. Artzt is also a director of American Express
Company, Barilla S.p.A. (Italy), Evenflo & Spalding Holdings Corporation and GTE
Corporation, and a member of The Business Council. Age 68.
HENRY A. BIEDENHARN, III was President, Chief Executive Officer and a
director of Ouachita Coca-Cola Bottling Company, Inc., and four other Coca-Cola
bottling companies located in Arkansas, Louisiana and Mississippi, from 1981
until his retirement in February 1996. He also served as Chairman of the Board
of Ouachita Coca-Cola Bottling Company, Inc. from 1991 to February 1996. He has
been a director of Delta since 1986, and is a member of the Audit Committee and
the Benefit Funds Investment Committee. Mr. Biedenharn is a director of Hudson,
Inc. and Biedco Corporation. Age 56.
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, is Chairman of the Audit Committee, and
is a member of the Benefit Funds Investment Committee, the Corporate Governance
Committee and the Executive Committee. Mr. Broadhead is also a director of New
York Life Insurance Company and The Pittston Company, a
8
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trustee of Cornell University and a member of The Business Council and The
Business Roundtable. Age 62.
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 Corporate Strategy Committee, and is a
member of the Executive Committee, the Finance Committee and the Personnel &
Compensation Committee. Mr. Budd is also a director of GTE Corporation, a member
of the American Academy of Actuaries and The Business Council, and a Trustee of
Tufts University. Age 65.
R. EUGENE CARTLEDGE was Chairman of the Board of Savannah Foods &
Industries, Inc. from April 1996 until December 1997. 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 Personnel & Compensation Committee, and is a
member of the Corporate Strategy Committee, the Executive Committee and the
Finance Committee. He is also a director of Blount, Inc., Chase Brass
Industries, Inc., Sun Company, Inc., UCAR International Inc. and Union Camp
Corporation. Age 69.
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 and a member of the Advisory Board of Morgan Stanley, Inc. She was a
director of AMTRAK from 1974 to 1980, serving as Vice Chairman from 1974 until
1979. Age 68.
GERALD GRINSTEIN has been non-executive Chairman of the Company's Board of
Directors since 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 a member of the Corporate Governance Committee, the
Corporate Strategy Committee, the Finance Committee and the Personnel &
Compensation Committee. He is also a director of Browning-Ferris Industries,
Inc., Imperial Holly Corporation, PACCAR Inc., Sundstrand Corporation and Vans,
Inc. Age 66.
LEO F. MULLIN has been President and Chief Executive Officer of Delta since
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. Mr. Mullin is also a director of BellSouth Corporation
and Inland Steel Industries, Inc. He is a member of the board of the
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<PAGE>
Air Transport Association of America, the Atlanta Chamber of Commerce, the
Robert W. Woodruff Arts Center and Northwestern University. Age 55.
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. Age 66.
10
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock and, if
applicable, ESOP Preferred Stock beneficially owned as of August 31, 1998, by
each director of the Company, each person listed 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 1,115
Henry A. Biedenharn, III.................................................. Common Stock 21,067(2)(3)
James L. Broadhead........................................................ Common Stock 1,116
Edward H. Budd............................................................ Common Stock 5,677(3)
R. Eugene Cartledge....................................................... Common Stock 1,400
Mary Johnston Evans....................................................... Common Stock 1,659(3)
Gerald Grinstein.......................................................... Common Stock 2,567(3)(4)
Jesse Hill, Jr............................................................ Common Stock 1,583(5)
Leo F. Mullin............................................................. Common Stock 210,297(6)
ESOP Preferred Stock 0
Andrew J. Young........................................................... Common Stock 539
EXECUTIVE OFFICERS
Maurice W. Worth.......................................................... Common Stock 34,870(6)
ESOP Preferred Stock 154
Harold C. Alger........................................................... Common Stock 22,401(6)(7)
ESOP Preferred Stock 159(7)
Robert S. Harkey.......................................................... Common Stock 42,636(6)
ESOP Preferred Stock 86
Paul G. Matsen............................................................ Common Stock 23,438(6)
ESOP Preferred Stock 44
Ronald W. Allen........................................................... Common Stock 166,582(6)(8)
ESOP Preferred Stock 123
Directors and Executive Officers as a Group (18 Persons).................. Common Stock 584,717(6)(9)
ESOP Preferred Stock 676(9)
</TABLE>
- ------------------------
(1) No person or group listed in the table beneficially owned 1% or more of the
outstanding shares of 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 231 shares, 1,330 shares, 546 shares and 576 shares of Common Stock
attributable to Mr. Biedenharn, Mr. Budd, Mrs. Evans and Mr. Grinstein,
respectively, due to their selection of the Delta Common Stock Fund
investment return choice under the directors' deferred compensation
arrangement, described on page 6 of this proxy statement.
(4) Excludes 3,500 deferred shares of Common Stock which the Board of Directors
granted to Mr. Grinstein during fiscal 1998, and 5 additional deferred
shares earned through the reinvestment of dividend equivalents on such
shares. Mr. Grinstein will not have the power to vote or dispose of these
shares until they are issued to him after he completes his Board service.
See page 7 of this proxy statement for information regarding this grant.
(5) Excludes 400 shares of Common Stock held by Mr. Hill's spouse as custodian
for their minor grandchildren. Mr. Hill disclaims beneficial ownership of
these shares.
11
<PAGE>
(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. Mullin -- 200,000; Mr. Worth -- 21,000; Mr. Alger --
5,000; Mr. Harkey -- 31,000; Mr. Matsen -- 21,500; Mr. Allen -- 120,000; and
directors and executive officers as a group -- 398,500.
(7) 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.
(8) Excludes 200 shares of Common Stock held by Mr. Allen's spouse as custodian
for her minor children, and 400 shares of Common Stock held by Mr. Allen's
adult children and adult stepchildren. Mr. Allen disclaims beneficial
ownership of these shares.
(9) Excludes 1,013 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.
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
outstanding voting securities.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL CLASS ON
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP AUGUST 31, 1998
- --------------------------------------------- ------------------------- ------------------ -----------------
<S> <C> <C> <C>
Wellington Management Company, LLP........... Common Stock 6,443,330(1) 8.8%
75 State Street
Boston, MA 02109
Vanguard/Windsor Funds, Inc.................. Common Stock 5,780,961(2) 7.9%
Post Office Box 2600
Valley Forge, PA 19482-2600
Primecap Management Co....................... Common Stock 4,226,000(3) 5.8%
225 South Lake Ave., Suite 400
Pasadena, CA 91101-3005
Fidelity Management Trust Company............ ESOP Preferred Stock 6,596,638(4) 100.0%
82 Devonshire Street Common Stock 3,563,164(4) 4.9%
Boston, MA 02109
</TABLE>
- ------------------------
(1) Based on a Schedule 13G dated January 13, 1998, in which Wellington
Management Company, LLP reported that it had sole voting power over none of
such shares, shared voting power over 434,600 of such shares and shared
dispositive power over all 6,443,330 of such shares.
(2) Based on a Schedule 13G dated February 9, 1998, in which Vanguard/Windsor
Funds, Inc. reported that it had sole voting power and shared dispositive
power over all 5,780,961 of such shares.
(3) Based on a Schedule 13G dated January 31, 1998, in which Primecap Management
Co. reported that it had sole voting power and sole dispositive power over
all 4,226,000 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 the Delta Common Stock
Fund.
12
<PAGE>
Subject to certain federal tax limitations, during fiscal 1998, Delta
contributed 50 cents 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, 1998,
there were approximately 57,800 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, these 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, these 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 SAirGroup
(formerly Swissair, Swiss Air Transport Company Ltd.). Pursuant to these
agreements, the Company sold 2.5 million shares of Common Stock to each of
Singapore Airlines and SAirGroup, and purchased an equity interest in both of
these airlines.
In their equity cross-purchase agreements with Delta, Singapore Airlines and
SAirGroup have agreed to vote their shares of the Company's voting stock in
proportion to the votes cast by the Company's other shareowners or, at Singapore
Airlines' or SAirGroup'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 SAirGroup, July 9,
1999. Singapore Airlines and SAirGroup 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 SAirGroup.
PERSONNEL & COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Personnel & Compensation Committee of the Board of Directors (the
"Committee") 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 each principal
component of the current program. It also explains the basis on which the
Committee made fiscal 1998 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 attracts, retains and motivates talented executives to work for the
long-term advantage of the Company's primary
13
<PAGE>
stakeholder groups--Delta shareowners, Delta customers and the people employed
by Delta. 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 shareowner value,
will accomplish this objective.
Consistent with this philosophy, the Committee has structured the executive
compensation program to achieve the following:
- 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
shareowners 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 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. During fiscal 1998, the Committee compared 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 included
transportation, aerospace, service and selected consumer products companies that
on average 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 which comprise the published industry index in the
Performance Graph shown elsewhere in this proxy statement.
The Committee's review of executive compensation during fiscal 1998 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
further below those at the broader comparator group. 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 during fiscal 1998 was 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
14
<PAGE>
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. In this connection, the Committee relies
to a large extent on the Chief Executive Officer's evaluations of individual
executive officer performance, after reviewing such individual performance with
him. 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 1998, the Committee increased salary rates for selected
executives (other than 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 1998, the Company's executive officers were eligible to earn
awards based on achieving specific goals for pre-tax income, operating margin
and operation goals (safety, customer satisfaction and on-time performance),
weighted equally. Operating margin is measured both against a preset target as
well as relative to Delta's peer airlines. To emphasize the importance of
continued improvement, the Committee set the fiscal 1998 target performance
goals for each measure at levels above the fiscal 1997 results for those
measures.
Target awards for executive officers (other than the Chief Executive
Officer, whose award is discussed below) ranged from 50% to 75% of base salary,
and overall were somewhat below the average levels for comparable positions in
both pay comparison groups discussed above. Awards earned based on the pre-tax
income, operating margin and operations goals can range from a low of 16.7% of
target (once a specified threshold performance level is achieved) to a maximum
of 150% for exceeding all targeted goals by specified levels. Awards so earned
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.
For fiscal 1998, Delta's pre-tax income and operating margin results
exceeded the target goals set for the year, and operating margin results were
achieved at maximum based on the peer group adjustment. Results for the
operations goals were at target. 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 extent of the achievement of the individual performance goals
established. In addition, the awards to certain executive officers were
increased in accordance with the Committee's discretion to make such
adjustments. In determining final awards, the Committee notes that the Company's
overall performance for fiscal 1998 was strong, and that Delta improved its
financial condition over the prior year. The
15
<PAGE>
Company again achieved record levels of operating and net income, reduced its
long-term debt, increased shareowners' equity and enhanced its competitive
position.
STOCK-BASED AWARDS
The potential value of long-term incentive opportunities comprises the
largest portion of the total compensation package for executive officers. The
Committee strongly believes this approach to total compensation opportunities
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. The plan has been approved by shareowners, initially in 1988 and
most recently when the plan was amended in October 1997.
In January 1998, the Committee granted non-qualified stock options to
executive officers (other than the Chief Executive Officer) and selected other
employees giving them the right to purchase shares of Common Stock at an
exercise price equal to $117.25, the closing price of the Common Stock on the
New York Stock Exchange on the date of grant. Stock options granted in fiscal
1998 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 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 used for fiscal 1998 pay comparisons.
An annualized long-term award value is determined for each eligible employee
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.
The Committee also made stock option and restricted stock grants to
executive officers (other than the Chief Executive Officer, whose awards are
discussed below) hired during the fiscal year. Stock option terms generally
match those for the grants described above (e.g., exercise price at fair market
value as of the date of grant, ten-year option term, etc.); however, these stock
options become exercisable in stages over five years following the grant date.
Restricted stock grants vest in stages over three or five years.
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 the interests of executives and Delta's shareowners will be more
closely aligned if executives own meaningful amounts of Delta stock. For this
reason, the Committee adopted guidelines requiring that over a period of time
executive officers own stock worth either two or three times base salary, based
on level of responsibility. Stock in the form of unexercised options or unvested
restricted stock does not count for purposes of measuring compliance with the
ownership guidelines.
16
<PAGE>
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 shareowners. The Committee reserves the right, however, to make
exceptions to this practice when it determines that doing so will better support
the Company's compensation policies or its business strategy and long-term
goals.
FISCAL YEAR 1998 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Allen was Chairman and Chief Executive Officer of the Company for one
month during fiscal 1998 until his retirement on July 31, 1997. For his month of
service, Mr. Allen received one-twelfth of his annual salary of $575,000. He
received a lump sum severance payment and other benefits under a Retirement
Agreement with Delta, details of which are described under the section entitled
"Agreement with Mr. Allen" elsewhere in this proxy statement.
Mr. Worth served as acting Chief Executive Officer during the period between
Mr. Allen's retirement and the date Mr. Mullin became Delta's President and
Chief Executive Officer; thereafter, he served as Delta's Chief Operating
Officer. During the period in which he served as acting Chief Executive Officer,
Mr. Worth's salary was based on an annual rate of $450,000.
On August 14, 1997, Delta entered into an employment agreement with Mr.
Mullin to become President and Chief Executive Officer of the Company. The
Committee and the Board of Directors approved Mr. Mullin's employment agreement
after an extensive search had been conducted by the Board with the assistance of
an executive search firm. In determining Mr. Mullin's compensation, the Board
focused on the importance of hiring a President and Chief Executive Officer with
the strategic, financial and leadership skills who could take the actions
necessary to improve Delta's competitiveness and profitability. The Board also
recognized the need to consider Mr. Mullin's compensation at his former employer
as well as benefits he forfeited upon his resignation.
The terms of Mr. Mullin's employment agreement are set forth in the section
entitled "Employment Agreement with Mr. Mullin" elsewhere in this proxy
statement. Mr. Mullin's base salary, stock option and restricted stock awards
for fiscal 1998 were governed by the terms of this agreement, which also
provided for a guaranteed 1998 annual incentive award equal to Mr. Mullin's base
salary.
Because the Committee determined that Delta's performance during fiscal 1998
was outstanding, Mr. Mullin's incentive compensation award was increased to $1
million. In making this determination, the Committee noted the numerous
improvements in many areas since Mr. Mullin became President and Chief Executive
Officer. Among the factors the Committee considered (without specific weighting)
are Delta's record net income and other excellent financial results in fiscal
1998, significant improvements in customer service and operational measures,
substantial increases in employee morale, the selection and hiring of key
executives, improvement of the Company's competitive position and Delta's strong
stock price.
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<PAGE>
OTHER MATTERS
During fiscal 1998, the Board of Directors adopted a formal process by which
this Committee conducts an annual and independent evaluation of the Chief
Executive Officer's performance that involves written feedback from all
directors. The Committee reviewed the results of this evaluation with the Board
at its July 1998 meeting.
Respectfully submitted,
THE PERSONNEL & COMPENSATION COMMITTEE
R. Eugene Cartledge, CHAIRMAN
James L. Broadhead (Committee member until November 1, 1997)
Edward H. Budd
Mary Johnston Evans
Gerald Grinstein
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid to the Company's Chief Executive Officer, its four other most highly
compensated executive officers at June 30, 1998 and its former Chief Executive
Officer, for the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ------------------------ -------------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPEN-
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- --------------------------- --------- --------- --------- ----------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leo F. Mullin.............. 1998 571,250 1,000,000 204,361 526,500 500,000 0 301,488
President and Chief
Executive Officer(7)
Maurice W. Worth........... 1998 462,600 558,838 10,110 0 36,500 0 14,792
Chief Operating 1997 333,333 205,743 8,639 0 21,000 0 13,700
Officer(7) 1996 282,500 237,500 7,123 0 26,000 0 11,823
Harold C. Alger............ 1998 367,500 322,463 10,055 0 16,500 0 14,792
Executive Vice President 1997 333,333 205,743 8,639 0 21,000 0 13,700
-- Operations 1996 300,000 237,500 7,909 0 26,000 0 12,796
Robert S. Harkey........... 1998 270,833 223,535 7,182 0 10,500 0 10,680
Senior Vice President -- 1997 243,333 159,556 6,170 0 14,000 0 9,893
General Counsel & 1996 230,000 163,875 6,058 0 17,000 0 9,804
Secretary
Paul G. Matsen............. 1998 210,000 166,906 5,746 0 9,100 0 9,824
Senior Vice President --
Alliance Strategy &
Development(8)
Ronald W. Allen............ 1998 47,917 0 51,813 0 0 0 6,081,001
Chairman of the Board, 1997 562,500 0 14,183 0 54,000 0 20,568
President and Chief 1996 475,000 532,594 12,517 0 66,000 0 15,504
Executive Officer
(retired effective July
31, 1997)(7)
</TABLE>
- ------------------------
(1) Represents the incentive compensation award, if any, for services rendered
during the specified fiscal year. Amounts earned in fiscal 1998 were paid in
the first quarter of fiscal 1999.
(2) The amount shown for Mr. Mullin represents reimbursements for taxes related
to Delta's payments of relocation expenses. The amounts shown for Messrs.
Worth, Alger, Harkey and Matsen for fiscal 1998 represent reimbursements for
taxes related to Delta's payment of life insurance premiums. No person
listed in the Summary Compensation Table other than Mr. Allen received
compensation in the form of personal benefits in excess of the lesser of
$50,000 or 10% of the total of his annual salary and bonus.
The amount shown for Mr. Allen for fiscal 1998 includes a $16,519
reimbursement for taxes related to Delta's payment of life insurance
premiums. The amount also includes $35,294 in personal benefits, of which
$25,565 related to the installation and improvement of residential security
systems.
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<PAGE>
(3) On August 14, 1997, the Personnel & Compensation Committee granted Mr.
Mullin 6,000 shares of restricted stock. These shares vest in three equal
installments on July 1, 1998, 1999 and 2000, although the shares are subject
to earlier vesting or forfeiture in certain circumstances. Cash dividends on
the restricted stock are reinvested in additional shares of Common Stock
which are subject to the same restrictions as the original award. The value
of this award shown in the table is based on the closing price of the Common
Stock on the New York Stock Exchange on the grant date.
At June 30, 1998, the number and value (based on the $129.25 closing price
of the Common Stock on the New York Stock Exchange on June 30, 1998) of the
aggregate restricted stock holdings of the following persons named in the
Summary Compensation Table was: Mr. Mullin -- 6,007 shares valued at
$776,405; Mr. Worth -- 2,420 shares valued at $312,785; Mr. Alger -- 2,824
shares valued at $365,002; Mr. Harkey -- 1,916 shares valued at $247,643;
and Mr. Matsen -- 1,008 shares valued at $130,284. The restrictions on Mr.
Allen's fiscal 1995 restricted stock award lapsed at the time of his
retirement pursuant to the terms of his Retirement Agreement (discussed on
pages 25-26 of this proxy statement).
(4) Represents the number of shares of Common Stock subject to stock options
awarded under the Company's 1989 Stock Incentive Plan.
(5) The Company does not have a plan which meets the definition of a Long Term
Incentive Plan.
(6) The amount shown for Mr. Mullin represents Delta's payments of $239,541 for
Mr. Mullin's relocation expenses, and $61,947 for his legal fees in
connection with the preparation of his Employment Agreement (described at
pages 24-25 of this proxy statement).
During fiscal 1998, Delta paid supplemental group life insurance premiums,
and made contributions under the Savings Plan for the persons named in the
Summary Compensation Table as follows: Mr. Mullin -- none; Mr. Worth --
$11,592 and $3,200, respectively; Mr. Alger -- $11,592 and $3,200,
respectively; Mr. Harkey -- $8,280 and $2,400, respectively; Mr. Matsen --
$6,624 and $3,200, respectively; and Mr. Allen -- $19,044 and $958,
respectively.
Pursuant to Mr. Allen's Retirement Agreement, during fiscal 1998, Delta also
paid to, or on behalf of, Mr. Allen, a lump sum of $4,586,515, supplemental
retirement payments of $283,294, advisory director fees of $22,917,
consulting fees of $458,398, legal fees of $210,000 in connection with the
preparation of his Retirement Agreement, and expenses of $91,099 associated
with providing Mr. Allen an office and secretary. In addition, the Company
incurred one-time costs of $408,776 to design, construct and furnish Mr.
Allen's office. See pages 25-26 of this proxy statement for information
regarding Mr. Allen's Retirement Agreement.
(7) Mr. Mullin was elected President and Chief Executive Officer of Delta
effective August 14, 1997. Mr. Worth served as acting Chief Executive
Officer from August 1, 1997 to August 14, 1997. Mr. Allen retired effective
July 31, 1997.
(8) Mr. Matsen became an executive officer in November 1997. Accordingly,
information regarding his compensation for fiscal 1996 and 1997 is not
included.
20
<PAGE>
The following table sets forth certain information regarding stock options
granted during fiscal 1998 to the persons named in the Summary Compensation
Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS (1) VALUE
------------------------------------------------------ -----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANT DATE GRANTED(#) FISCAL YEAR ($/SH) (2) DATE VALUE($)(3)
- ------------------------------ ---------- ------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leo F. Mullin................. 08/14/97 500,000(2) 5.08 88.3125 08/14/2007 16,889,000
Maurice W. Worth.............. 01/22/98 36,500(3) 0.37 117.2500 01/21/2008 1,351,230
Harold C. Alger............... 01/22/98 16,500(3) 0.17 117.2500 01/21/2008 610,830
Robert S. Harkey.............. 01/22/98 10,500(3) 0.11 117.2500 01/21/2008 388,710
Paul G. Matsen................ 01/22/98 9,100(3) 0.09 117.2500 01/21/2008 336,882
Ronald W. Allen............... N/A 0 N/A N/A N/A N/A
</TABLE>
- ------------------------
(1) None of the grants made during fiscal 1998 included stock appreciation
rights.
(2) The exercise price for Mr. Mullin's grant is equal to the opening price of
the Common Stock on the New York Stock Exchange on the grant date. These
stock options become exercisable as to 200,000 shares on August 14, 1998,
and as to an additional 100,000 shares on each of August 14, 1999, 2000 and
2001. The exercise price for grants to Messrs. Worth, Alger, Harkey and
Matsen is equal to the closing price of the Common Stock on the New York
Stock Exchange on January 22, 1998, the grant date. These grants become
exercisable on January 22, 1999.
(3) The hypothetical grant date present value was determined using the
Black-Scholes option pricing model and, consistent with the Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," includes the following material assumptions and adjustments:
<TABLE>
<CAPTION>
EXPECTED INTEREST VOLATILITY DIVIDEND
DATE OPTION BECOMES EXERCISABLE OPTION TERM RATE(%)(a) RATE(%)(b) YIELD(%)(c)
- ----------------------------------- -------------------- ------------------- ----------- -----------
<S> <C> <C> <C> <C>
August 14, 1998.................... 4.6 years 6.14 26.62 0.23
August 14, 1999.................... 5.6 years 6.19 26.05 0.23
August 14, 2000.................... 6.6 years 6.26 26.24 0.23
August 14, 2001.................... 7.6 years 6.29 26.94 0.23
January 22, 1999................... 4.6 years 5.41 25.60 0.17
</TABLE>
(a) The interest rate represents the interest rate on a U.S. Treasury
security on the grant date with a maturity date corresponding to the
expected option term.
(b) The volatility rate is calculated using monthly Common Stock closing
price and dividend information for the period equal to the expected
option term that ended on the grant date.
(c) The dividend yield represents the Common Stock's current $0.20 per share
annualized dividend divided by the fair market value of the Common Stock
on the grant date.
21
<PAGE>
The following table sets forth certain information regarding stock options
exercised by the persons named in the Summary Compensation Table during fiscal
1998, as well as the number and value of their unexercised in-the-money stock
options and stock appreciation rights at June 30, 1998 (based on the $129.25
closing price of the Common Stock on the New York Stock Exchange on June 30,
1998). None of the exercises described below involved the exercise of stock
appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES VALUE FY-END(#) AT FY-END($)
ACQUIRED ON REALIZED -------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ---------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Leo F. Mullin.......................... 0 0 0 500,000 0 20,468,750
Maurice W. Worth....................... 0 0 21,000 36,500 984,375 438,000
Harold C. Alger........................ 16,000 490,000 5,000 16,500 234,375 198,000
Robert S. Harkey....................... 0 0 56,000 10,500 3,049,625 126,000
Paul G. Matsen......................... 2,500 153,906 21,500 9,100 1,203,250 109,200
Ronald W. Allen........................ 89,000 6,319,000 209,000 0 13,039,625 0
</TABLE>
RETIREMENT AND OTHER PLANS
The following table shows the estimated annual pension payable to a
non-pilot employee (before reduction for Social Security benefits and not
accounting for the limitations discussed below), including the persons named in
the Summary Compensation Table, assuming retirement at the end of fiscal 1998 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>
FINAL 30 OR MORE
AVERAGE 10 YEARS OF 15 YEARS OF 20 YEARS OF 25 YEARS OF YEARS OF
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 40,000 $ 60,000 $ 80,000 $ 100,000 $ 120,000
400,000 80,000 120,000 160,000 200,000 240,000
600,000 120,000 180,000 240,000 300,000 360,000
800,000 160,000 240,000 320,000 400,000 480,000
1,000,000 200,000 300,000 400,000 500,000 600,000
1,200,000 240,000 360,000 480,000 600,000 720,000
1,400,000 280,000 420,000 560,000 700,000 840,000
1,600,000 320,000 480,000 640,000 800,000 960,000
1,800,000 360,000 540,000 720,000 900,000 1,080,000
2,000,000 400,000 600,000 800,000 1,000,000 1,200,000
</TABLE>
Final average earnings, for purposes of the Pension Plan, are the average of an
employee's annual earnings, based on the employee's salary and payments received
under the Company's Incentive Compensation Plan or broad-based profit sharing
programs, for the 36 consecutive months in the 120-month period immediately
preceding retirement which produces the highest average earnings. The annual
pension benefit is determined by multiplying final average earnings by 60%, and
then reducing that amount for
22
<PAGE>
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 the supplemental non-qualified retirement
plans discussed below, the years of service for the persons named in the Summary
Compensation Table are as follows: Mr. Mullin -- 22* years; Mr. Worth -- 37
years; Mr. Alger -- 32 years** ; Mr. Harkey -- 30 years; and Mr. Matsen -- 4
years. Employees designated by the Personnel & Compensation Committee, including
the persons named in the Summary Compensation Table, 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
persons named in the Summary Compensation Table.
Mr. Allen retired effective July 31, 1997, with 34 years of service. During
fiscal 1998, Mr. Allen received $367,380 under the qualified and non-qualified
retirement plans discussed above. See pages 25-26 of this proxy statement for
information regarding Mr. Allen's retirement and survivor benefits under his
Retirement Agreement.
- ------------------------
* Pursuant to Mr. Mullin's Employment Agreement, described on pages 24-25 of
this proxy statement, under certain circumstances, Mr. Mullin will receive a
retirement benefit equal to that which he would have earned under the
Company's defined benefit plans, calculated crediting him with 22 years of
service plus the number of years of service attributable to his actual
service with the Company. At June 30, 1998, Mr. Mullin had ten months of
actual service.
** For 27 of his 32 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 the pilot
plans, and the remainder will be paid from the Pension Plan and the
non-qualified plans described herein.
23
<PAGE>
OTHER MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel & Compensation Committee are Mr. Cartledge, who
serves as Chairman, Mr. Broadhead (until November 1, 1997), Mr. Budd, Mrs. Evans
and Mr. Grinstein.
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
Delta has entered into Retention Protection Agreements ("Retention
Agreements") with all of the persons named in the Summary Compensation Table
(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 shareowners' 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.
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 13, 2002, or the first anniversary of the date written notice of
intent to terminate is provided by the Company.
24
<PAGE>
The Employment Agreement set Mr. Mullin's initial annual salary at $650,000,
subject to possible future increases; and provides Mr. Mullin the opportunity to
receive an annual incentive award under the Company's Incentive Compensation
Plan, with a guaranteed award for fiscal 1998 equal to his initial annual
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 62 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 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 become exercisable as to 200,000 shares
on August 14, 1998, and as to an additional 100,000 shares on each of August 14,
1999, 2000 and 2001. The restricted shares granted to Mr. Mullin vest in three
equal installments on July 1, 1998, 1999 and 2000.
Pursuant to Mr. Mullin's Employment Agreement, an agent of the Company
purchased Mr. Mullin's home in Chicago. The Company's purchase price was
$1,175,000, which is equal to the price an unrelated third party paid to
purchase the house from the Company.
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 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
25
<PAGE>
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 prior 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 $4,586,515,
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 $765,600 per year. In addition, Delta agreed to provide Mr. Allen with
retiree life insurance coverage as though he had retired at age 65; survivor
benefits under the Company's Survivorship Plan (see page 23) 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.
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 1998 all Reporting Persons
complied with their Section 16(a) filing obligations, except that a Form 4
reporting a sale of Common Stock in connection with a stock option exercise by
Mr. Matsen was filed late.
26
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
with the cumulative total returns on two published indices, the Standard &
Poor's 500 Stock Index and the Standard & Poor's Airline Index, over the
preceding five fiscal years.
CUMULATIVE TOTAL RETURNS (1)
ON $100 INVESTED ON JUNE 30, 1993
[Graphic]
<TABLE>
<CAPTION>
DATE DELTA S&P 500 S&P AIRLINE (2)
- ---------------------------------------------------------------------- --------- --------- -----------------
<S> <C> <C> <C>
June 30, 1993......................................................... $ 100.00 $ 100.00 $ 100.00
June 30, 1994......................................................... $ 93.92 $ 101.44 $ 91.50
June 30, 1995......................................................... $ 153.63 $ 127.81 $ 110.64
June 30, 1996......................................................... $ 173.36 $ 160.95 $ 133.98
June 30, 1997......................................................... $ 173.02 $ 216.70 $ 138.68
June 30, 1998......................................................... $ 271.13 $ 281.90 $ 248.24
</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.
27
<PAGE>
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 1999, subject to ratification by the shareowners. Arthur
Andersen LLP has served as the Company's independent auditors since 1949. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting, and will have an opportunity to make a statement if he or she so
desires and to respond to questions. If the shareowners 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
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
A. DESCRIPTION OF PROPOSED AMENDMENT
The Board of Directors has approved, and is recommending to the shareowners
for approval at the Annual Meeting, an amendment to Article Fourth of the
Certificate of Incorporation (1) to increase the number of shares of Common
Stock which the Company is authorized to issue from 150 million, par value $3.00
per share, to 450 million, par value $1.50 per share; and (2) to effect a
two-for-one stock split by changing each issued share of Common Stock into two
shares of Common Stock, par value $1.50 per share. The Board of Directors
determined that this amendment is advisable and should be considered at the
Annual Meeting to be held October 22, 1998. The full text of the proposed
amendment to the Certificate of Incorporation is set forth in Appendix A to this
proxy statement.
The Company is currently authorized to issue 20 million shares of preferred
stock, par value $1.00 per share. The proposed amendment will not affect this
authorization.
B. PURPOSES AND EFFECTS OF PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK
The proposed amendment would increase the number of shares of Common Stock
which the Company is authorized to issue from 150 million to 450 million. The
additional 300 million shares would be a part of the existing class of Common
Stock and, if and when issued, would have the same rights and privileges as the
shares of Common Stock presently issued and outstanding.
At August 31, 1998, 73,482,933 shares of Common Stock were outstanding;
15,268,916 shares of Common Stock were held in treasury; and 27,983,810 shares
of Common Stock were reserved for issuance under the Company's broad-based stock
option plans, the 1989 Stock Incentive Plan and the Non-Employee Directors'
Stock Plan; and 5,658,596 shares of Common Stock were reserved for conversion of
the Company's outstanding ESOP Preferred Stock.
The Board of Directors believes it is desirable to increase the number of
shares of Common Stock the Company is authorized to issue to accomplish the
proposed stock split, to reserve an amount of shares sufficient to satisfy the
requirements set forth above and to provide the Company with adequate
flexibility in the future. Except for the proposed stock split, the Company has
no present commitments, agreements or intent to issue additional shares of
Common Stock, other than with respect to currently reserved shares, or shares
which may be issued or transferred from treasury under Delta's employee benefit,
stock option and dividend reinvestment plans. The proposed stock split cannot
occur unless shareowners approve the proposed amendment to Article Fourth of the
Certificate of Incorporation.
28
<PAGE>
The proposed amendment to Article Fourth would permit the issuance of
additional shares without further action or authorization by shareowners (except
as may be required in a specific case by law or New York Stock Exchange rules).
The Board believes it is prudent for the Company to have this flexibility.
The holders of Common Stock of the Company are not entitled to preemptive
rights or cumulative voting. Thus, the issuance of additional shares of Common
Stock might dilute, under certain circumstances, the ownership and voting rights
of shareowners.
The proposed increase in the number of shares of Common Stock the Company is
authorized to issue is not intended to inhibit a change in control of the
Company. The availability for issuance of additional shares of Common Stock
could discourage, or make more difficult, efforts to obtain control of the
Company. For example, the issuance of shares of Common Stock in a public or
private sale, merger or similar transaction would increase the number of
outstanding shares, thereby possibly diluting the interest of a party attempting
to obtain control of the Company. The Company is not aware of any pending or
threatened efforts to acquire control of the Company.
C. PURPOSES AND EFFECTS OF PROPOSED TWO-FOR-ONE COMMON STOCK SPLIT
The Board of Directors anticipates that the increase in the number of
outstanding shares of Common Stock of the Company resulting from a two-for-one
stock split will place the market price of the Common Stock in a range more
attractive to investors, particularly individuals, and may result in a broader
market for the shares. The Common Stock is currently listed for trading on the
New York Stock Exchange, and the Company will apply for listing of the
additional shares of Common Stock to be issued in the event the proposed stock
split is approved.
If the proposed amendment is adopted, each shareowner of record at 5:00
p.m., eastern standard time, on November 2, 1998, would be the record owner of,
and entitled to receive, a certificate or certificates representing one
additional share of Common Stock, par value $1.50 per share, for each share of
Common Stock then owned of record by such shareowner. In addition, certificates
representing shares of Common Stock, $3.00 par value, would be deemed to
represent the same number of shares of Common Stock having a par value of $1.50
per share. Consequently, certificates representing shares of Common Stock should
be retained by each shareowner and should not be returned to the Company or to
its transfer agent. It will not be necessary to submit outstanding certificates
for exchange.
If effected, the proposed stock split will result in an adjustment to each
outstanding share of ESOP Preferred Stock by changing (1) the conversion price
from $83.94 to $41.97; (2) the conversion ratio from 0.8578 to 1.7155; and (3)
the voting rights from one vote to two votes. Thus, the proposed stock split
would not dilute the economic interest of the holders of the ESOP Preferred
Stock, nor would it have any effect on the proportionate voting rights of such
holders. In addition, appropriate adjustments will be made to the Company's 1989
Stock Incentive Plan and broad-based stock option plans.
The Company has been advised by counsel that the proposed stock split would
result in no gain or loss or realization of taxable income to owners of Common
Stock under existing United States federal income tax laws. The cost basis for
tax purposes of each new share and each retained share of Common Stock would be
equal to one-half of the cost basis for tax purposes of the corresponding share
immediately preceding the stock split. In addition, the holding period for the
additional shares issued pursuant to the stock split would be deemed to be the
same as the holding period for the original share of Common Stock. The laws of
jurisdictions other than the United States may impose income taxes on the
issuance of the additional shares and shareowners are urged to consult their tax
advisors.
If shareowners dispose of their shares subsequent to the stock split, they
may pay higher brokerage commissions on the same relative interest in the
Company because that interest is represented by a greater
29
<PAGE>
number of shares. Shareowners may wish to consult their respective brokers to
ascertain the brokerage commission that would be charged for disposing of the
greater number of shares.
If the proposed amendment is adopted, the shareowners' equity accounts of
the Company would not change. The par value of a share of Common Stock after the
split would be $1.50 per share. The number of shares issued and outstanding,
reserved for issuance and held in the treasury would double.
D. EFFECTIVE DATE OF PROPOSED AMENDMENT AND ISSUANCE OF SHARES FOR STOCK SPLIT
The proposed amendment to Article Fourth of the Certificate of Incorporation
of the Company, if adopted by the required vote of shareowners, will become
effective at 5:00 p.m., eastern standard time, on November 2, 1998, the proposed
record date for the determination of the owners of Common Stock entitled to
receive a certificate or certificates representing the additional shares.
Please do not destroy or send your present Common Stock certificates to the
Company. If the proposed amendment is adopted, those certificates will remain
valid for the number of shares shown thereon, and should be carefully preserved
by you. The Company expects that the additional shares will be distributed on or
about November 16, 1998, either by delivery of physical certificates through the
mail or by book-entry in the records of the Company. If the additional shares
are distributed by book-entry, you will be entitled to receive physical stock
certificates upon request.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL 4
SHAREOWNER PROPOSAL
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who is the beneficial owner of 50 shares of
Common Stock, has given notice that she will introduce the following resolution
at the Annual Meeting:
"RESOLVED: That the stockholders of Delta Air Lines, Inc., assembled in
Annual Meeting in person and by proxy, hereby request the Board of Directors to
take the necessary steps to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
REASONS: Many states have mandatory cumulative voting, so do National Banks.
In addition, many corporations have adopted cumulative voting.
If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
Cumulative voting could facilitate the election of directors who represent
special minority interests. The Board of Directors opposes cumulative voting
because it believes each director has a duty to represent the interests of the
shareowners as a whole, rather than only a limited group of shareowners.
Moreover, the Board believes the present method of voting, in which each
director is elected by a majority of the votes present and entitled to vote at
the annual meeting of shareowners, provides the best assurance that directors
will represent all shareowners. ACCORDINGLY, THE BOARD RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL.
30
<PAGE>
PROPOSAL 5
SHAREOWNER PROPOSAL
The Sisters of St. Francis of Philadelphia, 609 South Convent Road, Aston,
PA 19014, who are the beneficial owners of shares of Common Stock with a market
value of at least $1,000, and the Bernardine Franciscan Sisters, 2627 West Ninth
Street, Chester, PA 19013, who are the beneficial owners of at least 100 shares
of Common Stock, have given notice that they will introduce the following
resolution at the Annual Meeting:
"ENDORSEMENT OF THE CERES PRINCIPLES
FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY"
"WHEREAS WE BELIEVE, Responsible implementation of a sound, credible
environmental policy increases long-term shareholder value by raising
efficiency, decreasing clean-up costs, reducing litigation, enhancing public
image and product attractiveness.
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For maximum
credibility and usefulness, such standards should specifically meet the concerns
of investors and other stakeholders.
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize the risk of environmental
liability.
WHEREAS: The Coalition for Environmentally Responsible Economies (CERES)
- -which includes shareholders of this Company; public interest representatives,
and environmental experts--consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental performance
and reporting. Scores of companies, including Bank America, Baxter
International, Bethlehem Steel, General Motors, H.B. Fuller, ITT Industries,
Pennsylvania Power and Light, Polaroid, and Sun (Sunoco), have endorsed these
principles to demonstrate their commitment to public environmental
accountability and standardized reporting. Fortune 500 endorsers say that the
benefits of working with CERES are *public credibility, *direct access to major
environmental and shareholder organizations, *leadership in designing the
rapidly advancing standardization of environmental disclosure, and *measurable
value-added for the company's environmental initiative;
A company endorsing the CERES Principles commits to work toward:
<TABLE>
<S> <C> <C>
1. Protection of the biosphere 4. Energy conservation 7. Environmental restoration
2. Sustainable natural resource use 5. Risk reduction 8. Informing the public
3. Waste reduction and disposal 6. Safe products/services 9. Management commitment
10. Audits and reports
</TABLE>
(Materials on the CERES Principles and CERES Report Form are obtainable from
CERES, 711 Atlantic Avenue, Boston, MA 02110, tel: 617-451-0927, fax:
617-482-2028).
CERES is distinguished from other initiatives for corporate environmental
responsibility by being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
31
<PAGE>
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its environmental
impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar resolutions
at various companies have portfolios totaling $75 billion. Furthermore, the
number of public pension funds and foundations supporting this resolution
increases every year. We believe the CERES Principles exceed the European
Community regulation for voluntary participation in verified and
publicly-reported eco-management and auditing, and that they also exceed the
requirements for ISO 14000.
Your vote FOR this resolution will encourage both scrutiny of our Company's
environmental policies and reports and adherence to goals supported by
management and shareholders alike. We believe the CERES Principles will protect
both your investment and your environment."
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL.
Delta has in place a policy recognizing the need to preserve and protect the
vital natural resources of clean air, clean water and land. The Company also
recognizes its responsibility to comply with the laws, regulations and the
legitimate interests of those communities in which it operates. Delta's clear
and mandatory policy is to be sensitive to the quality of the environment and to
conduct its business in an environmentally conscious and responsible manner.
Implementation of this policy is a primary management objective and the
responsibility of all Delta personnel.
Delta's environmental policy includes the following principles:
- Maintaining an effective program of compliance with all environmental laws
and regulations;
- Properly managing solid and hazardous waste;
- Providing annual training to all employees involved in the handling of
hazardous materials and petroleum product storage and transfer;
- Minimizing the discharge of waste materials in to the environment by using
responsible pollution control practices; and
- Conducting audits of Delta's performance and practices to ensure
regulatory compliance and good environmental practice.
The Board believes the adoption of the CERES Principles would subject the
Company to additional reporting and audit requirements without enhancing Delta's
strong commitment to act in an environmentally responsible manner. ACCORDINGLY,
THE BOARD RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
EXPENSE OF SOLICITATION
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, telephone or by 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 $9,500 plus certain expenses.
32
<PAGE>
SUBMISSION OF SHAREOWNER PROPOSALS AND NOMINATIONS
To be considered for inclusion in the Company's 1999 proxy materials under
Securities and Exchange Commission regulations, a shareowner proposal must be
directed to the Secretary of the Company at its principal executive office
address set forth on page one of this proxy statement, must be received by the
Company not later than May 19, 1999, and must comply in all respects with the
applicable Securities and Exchange Commission rules and regulations.
The following requirements apply to all shareowner 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 shareowner proposing to nominate persons for
election to the Board of Directors, or to introduce other business, at the
annual meeting of shareowners to give timely written notice to the Secretary of
the Company. To be timely, a shareowner's notice must be delivered to or mailed
and received at the Company's principal executive offices not less than 90 days
nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting; provided that if the Board of Directors calls the
annual meeting for a date that is not within 30 days before or after such
anniversary date, notice by the shareowner 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 shareowner'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
shareowner'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 shareowner's name and address; (3) the class and number
of shares of the Company's capital stock beneficially owned by the shareowner;
and (4) any material interest of the shareowner in such business.
ANNUAL REPORT
This proxy statement is accompanied, or preceded, by the Company's Annual
Report to Shareowners for the fiscal year ended June 30, 1998. 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.
33
<PAGE>
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE CERTIFICATE OF INCORPORATION
OF DELTA AIR LINES, INC.
The first paragraph of Article FOURTH is proposed to be amended to read in
its entirety as follows:
"FOURTH: A. The total number of shares of capital stock which the
corporation shall have authority to issue is Four Hundred Seventy Million
(470,000,000), of which Four Hundred Fifty Million (450,000,000) shall be common
stock of the par value of One Dollar and Fifty Cents ($1.50) per share
(hereinafter called the "common stock"), and Twenty Million (20,000,000) shall
be preferred stock of the par value of One Dollar ($1.00) per share (hereinafter
called the "preferred stock").
"Each share of common stock, par value $3.00 per share, of the corporation
issued and outstanding or held in treasury of the corporation immediately prior
to 5:00 p.m., eastern standard time, on November 2, 1998 (the "Effective Time"),
that being the time when the amendment of this Article FOURTH of the Certificate
of Incorporation shall have become effective, shall be changed into and
reclassified into two fully paid and nonassessable shares of common stock, par
value $1.50 per share, such that at the Effective Time: (1) each holder of
record of common stock, par value $3.00 per share, shall, without further
action, be and become the holder of one additional share of common stock, par
value $1.50 per share, for each share of common stock, par value $3.00 per
share, held of record immediately prior to the Effective Time; and (2) each
certificate representing shares of common stock, par value $3.00 per share,
outstanding or held in treasury immediately prior to the Effective Time shall
continue to represent the same number of shares of common stock, par value $1.50
per share. The corporation shall issue and cause to be distributed to each
holder of record of shares of common stock, par value $3.00 per share,
immediately prior to the Effective Time, as promptly as practicable thereafter,
one additional share of common stock, par value $1.50 per share, for each share
of common stock, par value $3.00 per share, held of record immediately prior to
the Effective Time."
A-1
<PAGE>
APPENDIX B
PROXY
[DELTA AIR LINES, INC. LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF DELTA AIR LINES, INC.
The undersigned, having received the Notice of Annual Meeting of Shareowners
and Proxy Statement, hereby appoints Mary Johnston Evans, Gerald Grinstein
and Leo F. Mullin, and each of them, as proxies with full power of
substitution, for and in the name of the undersigned, to vote all shares of
Common Stock of Delta Air Lines, Inc. owned of record by the undersigned as
indicated on the reverse side of this Proxy Card and, in their discretion, on
such other matters as many properly come before the Annual Meeting of
Shareowners to be held at The Waldorf-Astoria, 301 Park Avenue, New York, New
York 10022, on Thursday, October 22, 1998, at 9:00 a.m., local time, or any
adjournment thereof, unless otherwise specified herein.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOX
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY CARD OR VOTE BY
TELEPHONE OR THE INTERNET.
NOMINEES FOR DIRECTOR:
(1) Edwin L. Artzt, (2) Henry A. Biedenharn, III, (3) James L. Broadhead,
(4) Edward H. Budd, (5) R. Eugene Cartledge, (6) Mary Johnston Evans,
(7) Gerald Grinstein, (8) Leo F. Mullin and (9) Andrew J. Young.
[See Reverse Side]
- -------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET
CONDUCT OF MEETING
In fairness to all shareowners attending the 1998 Annual Meeting of
Shareowners 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 of shareowner proposals may not
exceed a total of five minutes. Questions or comments about any proposal
under consideration should be limited to two minutes.
2. Questions or comments concerning any issue raised during the shareowner
question and comment period should be relevant to matters of general
interest to shareowners and will be limited to two minutes.
3. The use of cameras, sound recording equipment, communication devices, or any
other similar equipment is prohibited without Delta's prior permission.
<PAGE>
/X/ Please mark your votes as in this example.
This Proxy, when properly executed and delivered, will be voted in the manner
directed herein. If no direction is made, this Proxy will be voted FOR all of
the Board of Directors' nominees for Director, FOR Proposals 2 and 3, and
AGAINST Proposals 4 and 5.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Delta's Board of Directors recommends a vote FOR all nominees and FOR Proposals 2 and 3.
- ----------------------------------------------------------------------------------------
<S> <C> <C>
1. Election of Nominees / / FOR ALL / / WITHHOLD AUTHORITY
for Director. except as indicated below to vote for all
(see reverse)
Instruction: To withhold authority to vote for any individual nominee, write that
nominee's name below.
- ---------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of Arthur Andersen LLP as independent / / / / / /
auditors for fiscal year 1999.
3. PROPOSAL to amend the Certificate of Incorporation to increase the authorized / / / / / /
Common Stock of the Company and to effect a two-for-one split of the issued
Common Stock of the Company.
- ---------------------------------------------------------------------------------------
Delta's Board of Directors recommends a vote AGAINST Proposals 4 and 5.
- ---------------------------------------------------------------------------------------
4. PROPOSAL by a shareowner relating to cumulative voting for directors. / / / / / /
5. PROPOSAL by a shareowner relating to the CERES Principles for Public / / / / / /
Environmental Accountability.
- ---------------------------------------------------------------------------------------
I plan to attend the Annual Meeting of Shareowners. YES / /
This proxy, if properly executed and delivered, will revoke all prior proxies.
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 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 person. If shares are held jointly, each
joint owner should sign.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE DATE
</TABLE>
- ------------------------------------------------------------------------------
DETACH AND RETURN PROXY FORM
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
You may use the telephone or the internet, to vote your shares electronically,
24 hours per day, 7 days a week. To access the telephone or internet voting
system, you must use the control number printed in the box above.
1. To vote over the telephone: Using a touch-tone telephone, call
1-800-OK2-VOTE(1-800-652-8683).
2. To vote over the internet: Log on to the internet and go to the web site
http://www.vote-by-net.com
Your electronic vote authorizes the named proxies in the same manner as if
you marked, signed, dated and returned the proxy card. If you choose to vote
your shares electronically, there is no need for you to mail back your proxy
card.
- ------------------------------------------------------------------------------
ADMISSION TICKET
- ------------------------------------------------------------------------------
Please indicate whether you plan to attend the 1998 Annual Meeting of
Shareowners by marking the appropriate box on the Proxy Card, or if you use
the telephone or internet system, when prompted. Only the shareowner whose
name(s) appears on this ticket, or the proxy of that shareowner, will be
admitted. Due to space limitations, admission to the meeting will be on a
first-come, first-served basis. Registration will begin at 8:00 a.m.
DELTA AIR LINES, INC.
ANNUAL MEETING OF SHAREOWNERS
THURSDAY, OCTOBER 22, 1998, 9:00 A.M.
THE WALDORF-ASTORIA, 301 PARK AVENUE
NEW YORK, NEW YORK 10022
<PAGE>
[Delta Air Lines LOGO]
Internal Memorandum
DATE: September 16, 1998
TO: Participants in the Delta Family-Care Savings Plan
FROM: President and Chief Executive Officer
SUBJECT: DELTA'S 1998 ANNUAL MEETING OF SHAREOWNERS
As a participant in the Delta Family-Care Savings Plan (Savings Plan), you
have the confidential right to instruct Fidelity Management Trust Company,
the Savings Plan trustee (Trustee), how to vote the Delta stock attributable
to your Savings Plan account at Delta's 1998 Annual Meeting of Shareowners. I
strongly encourage you to exercise this right because your vote is important.
To instruct the Trustee how to vote the Delta stock attributable to your
Savings Plan account, please complete and sign the enclosed Voting
Instruction Form and return it in the enclosed envelope. Alternatively, you
may use the telephone or internet voting instruction system which is
discussed on the Voting Instruction Form.
Attendance at the Annual Meeting will be limited to shareowners, persons
holding proxies from shareowners, Savings Plan participants, and
representatives of the news media. Please indicate whether you plan to attend
the Annual Meeting by marking the appropriate box on the Voting Instruction
Form or, if you use the telephone or internet voting instruction system, by
indicating so when prompted.
Also enclosed is copy of Delta's 1998 Notice of Annual Meeting of
Shareowners, Proxy Statement and, if you were not a registered owner of Delta
stock on the August 31, 1998 record date for the Annual Meeting, Delta's Annual
Report to Shareowners. If you were a registered owner of Delta stock on the
record date, the Annual Report to Shareowners was previously sent to you in a
separate package with the proxy materials for those shares. To obtain an
additional copy of the Annual Report to Shareowners, please contact Investor
Relations at (404) 715-2170.
Delta's Board of Directors recommends a vote FOR the election of all 9
nominees for Director, FOR Proposals 2 and 3, and AGAINST Proposal 4 and 5,
as set forth in the Proxy Statement.
/s/ Leo
--------------------
Leo F. Mullin
Enclosures
<PAGE>
DELTA FAMILY-CARE SAVINGS PLAN
VOTING INSTRUCTION FORM
THIS VOTING INSTRUCTION FORM IS PROVIDED BY FIDELITY MANAGEMENT TRUST
COMPANY, AS TRUSTEE (TRUSTEE) FOR THE DELTA FAMILY-CARE SAVINGS PLAN (SAVINGS
PLAN), for the Annual Meeting of Shareowners of Delta Air Lines, Inc. (Delta
or the Company) to be held at The Waldorf-Astoria, 301 Park Avenue, New York
New York, on Thursday, October 22, 1998, at 9:00 a.m., local time, or any
adjournment thereof (Annual Meeting).
I understand that, under the Savings Plan, I have the confidential right to
instruct the Trustee how to vote shares of Delta's Series B ESOP Convertible
Preferred Stock and Common Stock attributable to my Savings Plan account. I
also understand that pages 12-13 of Delta's Proxy Statement dated September
16, 1998 describe how the Trustee will vote (1) such shares attributable to
my Savings Plan account if I do not provide voting instructions to the
Trustee on or before 5:00 p.m. eastern daylight time on October 20, 1998; and
(2) shares of Delta's Series B ESOP Convertible Preferred Stock that were not
allocated to any participant's Savings Plan account on the August 31, 1998
record date for the Annual Meeting.
Pursuant to the Savings Plan, I instruct the Trustee to vote the shares of
Delta's Series B ESOP Convertible Preferred Stock and Common Stock
attributable to my Savings Plan account at the Annual Meeting, as indicated
on the reverse of this form.
I hereby acknowledge receipt of Delta's Proxy Statement dated September 16,
1998.
NOMINEES FOR DIRECTOR:
(1) Edwin L. Artzt, (2) Henry A. Biedenharn, III, (3) James L. Broadhead,
(4) Edward H. Budd, (5) R. Eugene Cartledge, (6) Mary Johnston Evans,
(7) Gerald Grinstein, (8) Leo F. Mullin and (9) Andrew J. Young.
[See Reverse Side]
- -------------------------------------------------------------------------------
DETACH AND RETURN VOTING INSTRUCTION CARD; RETAIN ADMISSION TICKET
CONDUCT OF MEETING
In fairness to all shareowners attending the 1998 Annual Meeting of
Shareowners 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 of shareowner proposals may not
exceed a total of five minutes. Questions or comments about any proposal
under consideration should be limited to two minutes.
2. Questions or comments concerning any issue raised during the shareowner
question and comment period should be relevant to matters of general
interest to shareowner and will be limited to two minutes.
3. The use of cameras, sound recording equipment, communication devices, or any
other similar equipment is prohibited without Delta's prior permission.
<PAGE>
/X/ Please mark your votes as in this example.
<TABLE>
<CAPTION>
DELTA FAMILY-CARE SAVINGS PLAN VOTING INSTRUCTION FORM
- ----------------------------------------------------------------------------------------
Delta's Board of Directors recommends a vote FOR all nominees and FOR Proposals 2 and 3.
- ----------------------------------------------------------------------------------------
<S> <C> <C>
1. Election of Nominees / / FOR ALL / / WITHHOLD AUTHORITY
for Director. (except as indicated below) to vote for all
(see reverse)
Instruction: To withhold authority to vote for any individual nominee, write that
nominee's name below.
- ---------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of Arthur Andersen LLP as independent / / / / / /
auditors for fiscal year 1999.
3. PROPOSAL to amend the Certificate of Incorporation to increase the authorized / / / / / /
Common Stock of the Company and to effect a two-for-one split of the issued
Common Stock of the Company.
- ---------------------------------------------------------------------------------------
Delta's Board of Directors Recommends a vote AGAINST Proposals 4 and 5.
- ---------------------------------------------------------------------------------------
4. PROPOSAL by a shareowner relating to cumulative voting for directors. / / / / / /
5. PROPOSAL by a shareowner relating to the CERES Principles for Public / / / / / /
Environmental Accountability.
- ---------------------------------------------------------------------------------------
I plan to attend the Annual Meeting of Shareowners. YES / /
This Voting Instruction Form, if properly executed and delivered, will revoke all
prior instructions.
PLEASE DATE, SIGN AND MAIL THIS VOTING INSTRUCTION FORM IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Please sign EXACTLY as your name appears hereon. When signing as
administrator, attorney, executor, guardian or trustee, please give your full title.
--------------------------------------------------------------------------
SIGNATURE DATE
</TABLE>
- ------------------------------------------------------------------------------
DETACH AND RETURN VOTING INSTRUCTION FORM
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
You may use the telephone or the internet, 24 hours per day 7 days a week to
instruct the Trustee, how to vote the Delta stock attributable to your
Savings Plan account. To access the telephone or internet voting instruction
system, you must use the control number printed in the box above.
1. To vote over the telephone: Using a touch-tone telephone, call
1-800-OK2-VOTE(1-800-652-8683).
2. To vote over the internet: Log on to the internet and go to the web site
http://www.vote-by-net.com
Using the telephone or internet voting instruction system has the same effect
as giving the Trustee voting instructions by marking, signing, dating and
returning the Voting Instruction Form. If you use the telephone or internet
voting instruction system, there is no need to return your Voting Instruction
Form.
OTHER INSTRUCTIONS
To be effective, your voting instructions must be received
by the Trustee on or before 5:00 p.m. eastern daylight time on October 20,
1998. This deadline applies whether you use the Voting Instruction Form, or
the telephone or internet voting instruction system.
- ------------------------------------------------------------------------------
ADMISSION TICKET
- ------------------------------------------------------------------------------
Please indicate whether you plan to attend the 1998 Annual Meeting of
Shareowners by marking the appropriate box on the Voting Instruction Form or,
if you use the telephone or internet system, when prompted. You should bring
this Admission Ticket to the Annual Meeting to be admitted. Only the person
whose name appears on this ticket will be admitted. Due to space limitations,
admission to the meeting will be on a first-come, first-served basis.
Registration will begin at 8:00 a.m.
DELTA AIR LINES, INC.
ANNUAL MEETING OF SHAREOWNERS
THURSDAY, OCTOBER 22, 1998, 9:00 A.M.
THE WALDORF-ASTORIA, 301 PARK AVENUE
NEW YORK, NEW YORK 10022
