<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
USAir Group, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
USAir Group, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- - --------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
USAir Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 27, 1994
ARLINGTON, VIRGINIA
----------------
June 15, 1994
To the Stockholders of
USAir Group, Inc.
The 1994 annual meeting of stockholders of USAir Group, Inc. (the "Company")
will be held at Loews Pentagon City Cinema Theater 2, Fashion Center Shopping
Mall, 1100 South Hayes Street, Arlington, Virginia, on July 27, 1994 at 9:30
a.m. local time, to consider and act on the following matters:
1. The election of 16 directors to hold office for one year or until
their successors are elected and qualified (Item No. 1).
2. Ratification of the selection of auditors of the Company for fiscal
year 1994 (Item No. 2).
3. Reversion of certain shares of common stock of the Company which are
authorized and reserved for issuance under certain employee benefit plans
to authorized, unissued and unreserved common stock (Item No. 3).
4. Consideration of three stockholder proposals as described in the
accompanying Proxy Statement (Item Nos. 4, 5 and 6).
5. The transaction of such other business as may properly come before the
meeting.
Eligible stockholders of record at the close of business on May 31, 1994 will
be entitled to vote at the meeting. A list of stockholders entitled to vote at
the meeting may be examined at the executive offices of the Company at 2345
Crystal Drive, Arlington, Virginia.
By Order of the Board of Directors
James T. Lloyd
Secretary
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
USAIR GROUP, INC.
2345 CRYSTAL DRIVE
ARLINGTON, VIRGINIA 22227
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 27, 1994
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors") of USAir Group, Inc. (the
"Company") of proxies to be voted at the annual meeting of stockholders in
Arlington, Virginia on July 27, 1994. Enclosed with this Proxy Statement is
notice of the meeting, together with a proxy for your signature if you are
unable to attend. Stockholders who execute proxies may revoke them at any time
before they are voted. Any proxy may be revoked by the person giving it any
time before it is voted by delivering to the Secretary of the Company at 2345
Crystal Drive, Arlington, Virginia 22227, on or before the business day prior
to the meeting or at the meeting itself, a subsequent written notice of
revocation or a subsequent proxy relating to the same shares or by attending
the meeting and voting in person. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent to the
Company's stockholders is June 15, 1994.
Shares of the Company's common stock, par value $1.00 per share ("Common
Stock"), represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance
with the instructions indicated in the proxies. If no instructions are
indicated on a properly executed proxy of the Company, the shares will be voted
in accordance with the recommendations of the Board of Directors.
Eligible stockholders of record at the close of business on May 31, 1994
(other than holders of the Series B Preferred Stock (as defined below)) are
entitled to vote at the meeting. On May 31, 1994 the Company had outstanding
(exclusive of treasury stock) 59,682,312 shares of Common Stock, 358,000 shares
of Series A Cumulative Convertible Preferred Stock, without par value ("Series
A Preferred Stock"), 30,000 shares of Series F Cumulative Convertible Senior
Preferred Stock, without par value ("Series F Preferred Stock"), 152.1 shares
of Series T-1 Cumulative Convertible Exchangeable Senior Preferred Stock,
without par value ("Series T-1 Preferred Stock") and 9,919.8 shares of Series
T-2 Cumulative Convertible Exchangeable Senior Preferred Stock, without par
value ("Series T-2 Preferred Stock," and together with the Series T-1 Preferred
Stock, "Series T Preferred Stock"). Except for treasury stock, each share of
Common Stock is entitled to one vote, each share of Series A Preferred Stock is
entitled to 25.8099 votes, each share of Series F Preferred Stock is entitled
to 515.2886 votes per share, each share of Series T-1 Preferred Stock is
entitled to 487.8049 votes per share and each share of Series T-2 Preferred
Stock is entitled to 378.7879 votes per share. From time to time, the voting
power of the Series F Preferred Stock and Series T Preferred Stock may be
limited by then applicable U.S. statutory and U.S. Department of Transportation
(the "DOT") regulatory foreign ownership restrictions ("Foreign Ownership
Restrictions") the breach of which could result in the loss of any operating
certificate or authority of the Company or certain of its subsidiaries. As of
the date hereof, the
<PAGE>
Company does not believe that Foreign Ownership Restrictions limited the voting
power of the Series F Preferred Stock and the Series T Preferred Stock and the
Company expects that the shares of these series of preferred stock will be
entitled to their full voting power at the annual meeting.
REQUIRED VOTES
The vote of the holders of a plurality of the votes cast by holders of shares
of Common Stock, Series A Preferred Stock, Series F Preferred Stock and Series
T Preferred Stock, voting together as a single class, will elect candidates for
director (Item No. 1 on your proxy). Abstentions or broker non-votes as to the
election of directors will not affect the election of the candidates receiving
the plurality of votes. The vote of the holders of at least a majority of the
shares of Common Stock, Series A Preferred Stock, Series F Preferred Stock and
Series T Preferred Stock, present in person or represented by proxy at the
meeting and entitled to vote, voting together as a single class, is required
(i) to ratify the Board of Directors' appointment of KPMG Peat Marwick as the
Company's independent public accountants for 1994 (Item No. 2), (ii) to approve
the Company's proposal concerning reversion of certain reserved shares of
Common Stock to the status of authorized, unissued and unreserved Common Stock
(Item No. 3), and (iii) to approve each of the stockholder proposals (Items
Nos. 4, 5 and 6). Therefore, abstentions as to these particular proposals will
have the same effect as votes against such proposals. Broker non-votes as to
these particular proposals, however, will be deemed shares of stock not
entitled to vote on such proposals, will not be counted as votes for or against
such proposals, and will not be included in calculating the number of votes
necessary for approval of such proposals.
BENEFICIAL SECURITY OWNERSHIP
The following information pertains to Common Stock, Series A Preferred Stock,
Series F Preferred Stock, Series T Preferred Stock and Depositary Shares
("Depositary Shares"), each representing 1/100 of a share of the Company's
$437.50 Series B Cumulative Convertible Preferred Stock, without par value
("Series B Preferred Stock"), beneficially owned by all directors and executive
officers of the Company as of March 31, 1994. Unless indicated otherwise, the
information refers to ownership of Common Stock. Unless indicated otherwise by
footnote, the owner exercises sole voting and investment power over the
securities (other than unissued securities, the ownership of which has been
imputed to such owner). (Mr. Simmons resigned from the Board of Directors on
May 25, 1994.)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
OWNER SHARES(1) CLASS(2)
----- --------- ----------
<S> <C> <C>
DIRECTORS
Warren E. Buffett............................ --(3) (3)
Edwin I. Colodny............................. 136,512(4)
Mathias J. DeVito............................ 700
George J. W. Goodman......................... 200 Depositary Shares(5)
John W. Harris............................... 400
Edward A. Horrigan, Jr....................... 500
Robert LeBuhn................................ 8,000
Sir Colin Marshall........................... --(6) (6)
Roger P. Maynard............................. --(6) (6)
John G. Medlin, Jr........................... 2,000
Hanne M. Merriman............................ 1,500
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
OWNER SHARES(1) CLASS(2)
----- --------- ----------
<S> <C> <C>
Charles T. Munger............................ --(3) (3)
Frank L. Salizzoni........................... 167,800(7)
Seth E. Schofield............................ 421,789(8)
Richard P. Simmons........................... 5,000
Raymond W. Smith............................. 500
Derek M. Stevens............................. --(6) (6)
EXECUTIVE OFFICERS
Seth E. Schofield............................ See listing under
"Directors" above
W. Thomas Lagow.............................. 63,211(9)
Frank L. Salizzoni........................... See listing under
"Directors" above
James T. Lloyd............................... 191,492(10)
Michael R. Schwab............................ 186,492(11)
26 directors and executive officers of the
Company as a group............................ 1,451,232(12) 2.4%
</TABLE>
- - --------
(1) The persons listed also own a number of Preferred Share Purchase Rights
(the "Rights") equal to their Common Stock holdings, or, in the case of
the Series A Preferred Stock, Series F Preferred Stock and Series T
Preferred Stock, Common Stock receivable upon conversion. In addition,
such Rights are issuable on a one-for-one basis with respect to shares of
Common Stock receivable upon exercise of stock options or conversion of
Depositary Shares.
(2) Percentages are shown only where they exceed one percent of the number of
shares outstanding and, in the case of Common Stock holdings, are based
on shares of Common Stock outstanding (exclusive of treasury stock) on
March 31, 1994.
(3) Various affiliates of Berkshire Hathaway Inc. ("Berkshire") are
recordholders of 358,000 or 100% of the outstanding shares of Series A
Preferred Stock. Messrs. Buffett and Munger are Chairman and Chief
Executive Officer and Vice Chairman, respectively, of Berkshire and may
be deemed to control that company. Messrs. Buffett and Munger each
disclaims beneficial ownership of Series A Preferred Stock. See the
following table for information concerning the voting power of Series A
Preferred Stock.
(4) The listing of Mr. Colodny's holding includes 67,000 shares of Common
Stock issuable within 60 days of March 31, 1994 upon exercise of stock
options.
(5) Mr. Goodman's holding of Depositary Shares is convertible into 498 shares
of Common Stock.
(6) A wholly-owned subsidiary of British Airways Plc ("BA") is recordholder
of 30,000 or 100% of the outstanding shares of Series F Preferred Stock,
152.1 or 100% of the outstanding shares of the Series T-1 Preferred Stock
and 9,919.8 or 100% of the outstanding shares of the Series T-2 Preferred
Stock pursuant to BA's investment agreement dated as of January 21, 1993
with the Company (as amended, the "Investment Agreement"). Messrs.
Marshall, Maynard and Stevens are Chairman, Director of Corporate
Strategy and Chief Financial Officer, respectively, of BA and have been
designated by BA to act as directors of the Company pursuant to the
Investment Agreement. Messrs. Marshall, Maynard and Stevens each
disclaims beneficial ownership of Series F Preferred Stock and Series T
Preferred Stock. See the following table for information concerning the
voting power of Series F Preferred Stock and Series T Preferred Stock.
(7) The listing of Mr. Salizzoni's holding includes 152,800 shares of Common
Stock issuable within 60 days of March 31, 1994 upon exercise of stock
options and 6,000 shares of Restricted Stock.
(8) The listing of Mr. Schofield's holding includes 335,069 shares of Common
Stock issuable within 60 days of March 31, 1994 upon exercise of stock
options, and 30,000 shares of Common Stock subject to certain
restrictions upon disposition ("Restricted Stock").
(9) The listing of Mr. Lagow's holding reflects shares of Common Stock
issuable within 60 days of March 31, 1994 upon exercise of stock options.
(10) The listing of Mr. Lloyd's holding includes 169,742 shares of Common
Stock issuable within 60 days of March 31, 1994 upon exercise of stock
options and 4,000 shares of Restricted Stock.
(11) The listing of Mr. Schwab's holding includes 167,992 shares of Common
Stock issuable within 60 days of March 31, 1994 upon exercise of stock
options and 3,200 shares of Restricted Stock. Mr. Schwab resigned from
USAir on April 15, 1994, and, as a result, 1,600 shares of these shares
of Restricted Stock reverted to the Company.
(12) The listing of all directors' and officers' holdings includes 1,193,583
shares of Common Stock issuable within 60 days of March 31, 1994 upon
exercise of stock options and 50,400 shares of Restricted Stock.
3
<PAGE>
The only persons known to the Company (from reports on Schedules 13D and 13G
filed with the Securities and Exchange Commission (the "SEC")) which owned, as
of March 31, 1994, more than 5% of its Common Stock, Series A Preferred Stock,
Series F Preferred Stock and Series T Preferred Stock are listed below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
-------------- ------------------- ----------------------- --------
<C> <S> <C> <C>
Series A Preferred Stock Berkshire Hathaway Inc. 358,000(2) 100%(3)
1440 Kiewit Plaza
Omaha, Nebraska 68131
Series F Preferred Stock BritAir Acquisition Corp. Inc. 30,000(4) 100%(5)
75-20 Astoria Blvd.
Jackson Heights, New York 11370
Series T Preferred Stock BritAir Acquisition Corp. Inc. (6) 100%(5)
75-20 Astoria Blvd.
Jackson Heights, New York 11370
Common Stock The Equitable Companies 6,307,503(7) 10.6%
Incorporated
787 Seventh Ave.
New York, New York 10019
Common Stock Brinson Holdings, Inc. 4,832,200(8) 8.2%
209 South LaSalle
Chicago, Illinois 60604
</TABLE>
- - --------
(1) Represents percent of class of stock outstanding (exclusive of treasury
stock) on March 31, 1994.
(2) Number of shares as to which such person has shared voting power--358,000;
shared dispositive power--358,000.
(3) These shares of Series A Preferred Stock are owned directly by affiliates
of Berkshire, are convertible, under certain circumstances and subject to
certain antidilution adjustments, into 9,239,944 shares of Common Stock
and represent approximately 10.5% of the combined voting power of the
outstanding Common Stock, Series A Preferred Stock, Series F Preferred
Stock and Series T Preferred Stock, voting as a single class, at the
meeting. A number of Rights, equal to the number of shares of Common Stock
into which the Series A Preferred Stock is convertible, is also owned by
this person. As disclosed above, two directors of the Company, Messrs.
Buffett and Munger, may be deemed to control Berkshire and disclaim
beneficial ownership of Series A Preferred Stock.
(4) Number of shares as to which BA has sole voting power and sole dispositive
power--30,000.
(5) BritAir Acquisition Corp. Inc. is a wholly-owned subsidiary of BA and owns
Series F Preferred Stock and Series T Preferred Stock pursuant to the
Investment Agreement. Series F Preferred Stock and Series T Preferred
Stock are convertible, under certain circumstances on or after January 21,
1997 and subject to certain antidilution adjustments and Foreign Ownership
Restrictions, into a total of 15,458,658 and 3,831,695 shares of Common
Stock, respectively. Together, the Series F Preferred Stock and Series T
Preferred Stock represent approximately 21.9% of the combined voting power
of the outstanding Common Stock, Series A Preferred Stock, Series F
Preferred Stock and Series T Preferred Stock, voting as a single class, at
the meeting. A number of Rights, equal to the number of shares of Common
Stock into which the Series F Preferred Stock and Series T Preferred Stock
are convertible, is also owned by this person. As disclosed above, three
directors of the Company, Messrs. Marshall, Maynard and Stevens, have been
designated by BA to act as directors of the Company pursuant to the
Investment Agreement and disclaim beneficial ownership of Series F
Preferred Stock and Series T Preferred Stock.
(6) Reflects 152.1 or 100% of the outstanding shares of Series T-1 Preferred
Stock and 9,919.8 or 100% of the outstanding shares of Series T-2
Preferred Stock. BA has sole voting power and sole dispositive power as to
all these outstanding shares of Series T Preferred Stock.
(7) The Schedule 13G dated January 6, 1994 disclosing such ownership was
jointly filed by such person with five French mutual insurance companies
("Mutuelles AXA") and AXA. The Schedule 13G indicated that each of
Mutuelles AXA, as a group, and AXA expressly declares that the filing of
the Schedule 13G should not be construed as an admission that it is, for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended, the beneficial owner of any securities covered by the Schedule
13G. The Equitable Companies Incorporated and an affiliate have advised
the Company that Mutuelles AXA, as a group, and AXA do not, directly or
indirectly, have voting or investment power with respect to the shares.
Number of shares as to which such person has sole voting power--5,669,403;
shared voting power--1,300; no voting power--636,800; sole dispositive
power--6,305,703; shared dispositive power--none; no dispositive power--
1,800.
(8) The shares are owned by a direct and an indirect subsidiary of the person.
Number of shares as to which such subsidiaries have sole voting power--
4,832,200; sole dispositive power--4,832,200.
4
<PAGE>
BRITISH AIRWAYS INVESTMENT AGREEMENT
On January 21, 1993, the Company entered into the Investment Agreement with
BA. On the same date, BA purchased Series F Preferred Stock from the Company
for $300 million. In June 1993, pursuant to certain preemptive and optional
purchase rights under the Investment Agreement, BA purchased Series T-1
Preferred Stock and Series T-2 Preferred Stock from the Company for an
aggregate purchase price of approximately $100.7 million.
Under the terms of the Investment Agreement, assuming the Series F Preferred
Stock or any shares issued upon conversion thereof are outstanding and BA has
not sold any shares of preferred stock issued to it by the Company or any
common stock or other securities received upon conversion or exchange of the
preferred stock, BA is entitled at its option to elect to purchase from the
Company, on or prior to January 21, 1996, 50,000 shares of Series C Cumulative
Convertible Senior Preferred Stock, without par value ("Series C Preferred
Stock"), at a purchase price of $10,000 per share, to be paid by BA's surrender
of the Series F Preferred Stock and a payment of $200 million (the "Second
Purchase"), and, on or prior to January 21, 1998, assuming that BA has
purchased or is purchasing simultaneously Series C Preferred Stock, 25,000 (or
more in certain circumstances) shares of Series E Cumulative Convertible
Exchangeable Senior Preferred Stock, without par value ("Series E Preferred
Stock'), at a purchase price of $10,000 per share (the "Final Purchase").
Series E Preferred Stock is exchangeable under certain circumstances at the
option of the Company into certain debt securities of the Company. If the DOT
approves all the acts and transactions contemplated by the Investment
Agreement, at the election of either BA or the Company on or prior to January
21, 1998, BA's purchase of the Series C Preferred Stock (unless previously
consummated) and BA's purchase of the Series E Preferred Stock would be
consummated under certain circumstances. If BA has not elected to purchase the
Series C Preferred Stock by January 21, 1996, then the Company may at its
option redeem, in whole or in part, Series F Preferred Stock at the higher of
market value or the price of $10,000 per share, plus accrued dividends. On
March 7, 1994, BA announced that it would not make any additional investments
in the Company until the outcome of the Company's efforts to reduce its costs
and improve its financial results is known. The Company cannot predict in any
event whether or when the Second Purchase or the Final Purchase will be
consummated.
The preceding summary of the Investment Agreement, the Series F Preferred
Stock, the Series T Preferred Stock, the Series C Preferred Stock and the
Series E Preferred Stock and any other references to such documents or
securities herein do not purport to be complete and are subject to, and
qualified in their entirety by reference to, Appendices I-IX to the Company's
Proxy Statement dated April 26, 1993 and the material under the captions
"Business--British Airways Announcement Regarding Additional Investments in the
Company; Code Sharing" and "--British Airways Investment Agreement" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
In connection with BA's purchase of the Series T Preferred Stock in June
1993, BA and Messrs. Marshall, Maynard and Stevens were required by Section 16
of the Securities Exchange Act of 1934, as amended, and rules thereunder to
file by July 10, 1993, Form 4 reports disclosing this change of ownership. BA
and Messrs. Marshall, Maynard and Stevens filed these reports on September 14,
1993.
5
<PAGE>
ELECTION OF DIRECTORS (ITEM NO. 1)
As required by the Investment Agreement, the Board of Directors amended the
Company's By-Laws on January 21, 1993 to increase the authorized number of
directors by three and immediately thereafter elected Messrs. Marshall, Maynard
and Stevens to fill the new directorships. Under the Investment Agreement, the
Company is required to use its best efforts to ensure that the slate of persons
nominated by the Company for election as directors of the Company includes that
number of persons designated by BA that is the percentage of the total then
authorized number of directors, which is currently 16, of the Company that is
nearest to but not greater than the percentage (but in no event greater than
25%) of the aggregate voting power of the securities that vote with the Common
Stock as a single class for the election of directors of the Company then held
by BA and its wholly-owned subsidiaries. Under this provision of the Investment
Agreement, BA is entitled to designate three nominees for election to the Board
of Directors and has accordingly designated Messrs. Marshall, Maynard and
Stevens. Each of the nominees listed below is currently a director of the
Company and, except for Mr. Salizzoni, was elected in 1993 by the stockholders
of the Company. On May 25, 1994, Mr. Salizzoni was elected to fill the vacancy
on the Board of Directors resulting from Mr. Simmons' resignation from the
Board of Directors. Each director of the Company is also a director of the
Company's principal operating subsidiary, USAir, Inc. ("USAir"). Directors will
be elected to hold office for one year or until the election and qualification
of their successors. Proxies will be voted only for the nominees named below.
Except as noted otherwise, the following biographies describe the business
experience of each nominee for at least the past five years. Messrs. Buffett
and Munger have advised the Company that they support management's cost
reduction program, which includes employee concessions as well as other
initiatives to reduce USAir's costs of operation, and that their continued
service as directors of the Company and of USAir will depend upon USAir's
successfully reaching a timely agreement with its organized labor groups that,
in the opinion of Messrs. Buffett and Munger, provides USAir with sufficient
labor cost savings which, when combined with other cost reduction programs
being implemented by USAir, would afford USAir a reasonable opportunity to
achieve profitability in a low fare competitive environment.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Warren E. Buffett, 63... Mr. Buffett has been Chairman and Chief Execu- 1993
tive Officer of Berkshire Hathaway Inc. (insur-
ance, candy, retailing, manufacturing and pub-
lishing) since 1970. He is also a Director of
Capital Cities/ABC, Inc., The Coca-Cola Company,
The Gillette Company and Salomon Inc.
Mr. Buffett is a member of the Finance and Plan-
ning Committee of the Board of Directors.
Edwin I. Colodny, 68.... Mr. Colodny is of counsel to the law firm of 1975
Paul, Hastings, Janofsky & Walker. He retired as
Chairman of the Company and of USAir in July
1992. He served as Chief Executive Officer of
USAir from 1975 until retiring as an employee of
USAir in June 1991. Mr. Colodny is a Director of
Martin Marietta Corporation, Comsat Corporation
and Esterline Technologies, Inc., and is a mem-
ber of the Board of Trustees of the University
of Rochester. He is a member of the Finance and
Planning and Nominating Committees of the Board
of Directors.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Mathias J. DeVito, 63... Mr. DeVito is Chairman of the Board and Chief 1981
Executive Officer of The Rouse Company (real es-
tate development and management). He also serves
as a Director of First Maryland Bancorp and sub-
sidiaries of The Rouse Company. He is a member
of the Board of the Business Committee for the
Arts and former Chair of the Greater Baltimore
Committee. Mr. DeVito is Chairman of the Compen-
sation and Benefits Committee and a member of
the Finance and Planning Committee of the Board
of Directors.
George J. W. Goodman,
63..................... Mr. Goodman is President of Continental Fideli- 1978
ty, Inc., which provides editorial and invest-
ment services. He is the author of a number of
books and articles on finance and economics un-
der the pen name "Adam Smith" and is the host of
a television series of that name seen on public
broadcasting stations in the U.S. and on other
networks abroad. He is a Director of Cambrex
Corporation. Mr. Goodman also serves as a member
of the Advisory Committee of the Center for In-
ternational Relations at Princeton University,
and is a Trustee of the Urban Institute. He is a
member of the Compensation and Benefits and Fi-
nance and Planning Committees of the Board of
Directors.
John W. Harris, 47...... Mr. Harris is President of The Harris Group 1991
(real estate development). From 1972 through
1991, he was President of The Bissell Companies,
Inc. (real estate development). He is a Director
of Southern Bell Telephone and Telegraph Compa-
ny. Mr. Harris is former Chairman of the Greater
Charlotte Chamber of Commerce and a member of
the Board of Trustees of the University of North
Carolina and serves on the boards of several
community service organizations. He is a member
of the Audit and Compensation and Benefits Com-
mittees of the Board of Directors.
Edward A. Horrigan, Jr.,
64..................... Mr. Horrigan is Chairman of the Board of Direc- 1987
tors of Liggett Group Inc. (consumer products),
a position he has held since May 1993. He is
also the retired Vice Chairman of the Board of
RJR Nabisco, Inc. and retired Chairman and Chief
Executive Officer of R. J. Reynolds Tobacco Com-
pany, Winston-Salem, North Carolina (consumer
products). He is a Director of the Haggai Foun-
dation. Mr. Horrigan is a member of the Audit
and Nominating Committees of the Board of Direc-
tors.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Robert LeBuhn, 62....... Mr. LeBuhn is Chairman of Investor International 1966
(U.S.), Inc. (investments) and is a Director of
Acceptance Insurance Companies, Amdura Corp.,
Lomas Financial Corp. and Cambrex Corporation.
He is Trustee and President of the Geraldine R.
Dodge Foundation, Morristown, New Jersey and is
a member of the New York Society of Security
Analysts. He is Chairman of the Finance and
Planning Committee and a member of the Nominat-
ing Committee of the Board of Directors.
Sir Colin Marshall, 60.. Sir Colin was elected Chairman of BA in February 1993
1993. Previously, he had been Chief Executive of
BA and a member of BA's Board of Directors since
1983. Sir Colin is a Director of Grand Metropol-
itan plc, HSBC Holdings Plc, IBM United Kingdom
Holdings Limited and Qantas Airways Limited. He
is a member of the Finance and Planning Commit-
tee of the Board of Directors.
Roger P. Maynard, 51.... Mr. Maynard has been Director of Corporate 1993
Strategy of BA since 1991. Previously, from
1987, he had held various positions at BA, in-
cluding Director of Investor Relations & Market-
place Performance and Executive Vice President
North America. Mr. Maynard is a Director of
Qantas Airways Limited. Mr. Maynard is a member
of the Nominating and Compensation and Benefits
Committees of the Board of Directors.
John G. Medlin, Jr., 60. Mr. Medlin is Chairman of the Board and, until 1987
December 31, 1993, was Chief Executive Officer
of Wachovia Corporation (bank holding company).
Mr. Medlin also serves as a Director of
BellSouth Company, Burlington Industries, Inc.,
Media General, Inc., National Services Indus-
tries, Inc. and RJR Nabisco, Inc. He is Chairman
of the Nominating Committee and a member of the
Compensation and Benefits Committee of the Board
of Directors.
Hanne M. Merriman, 52... Mrs. Merriman is the Principal in Hanne Merriman 1985
Associates (retail business consultants). Previ-
ously, she served as President of Nan Duskin,
Inc. (retailing), President and Chief Executive
Officer of Honeybee, Inc., a division of Spie-
gel, Inc., and President of Garfinckel's, a di-
vision of Allied Stores Corporation. Mrs. Merri-
man is a Director of CIPSCO, Inc. Central Public
Service Company, State Farm Mutual Automobile
Insurance Company, The Rouse Company and Ann
Taylor Stores Corporation. She is a member of
the National Women's Forum
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
and a Trustee of The American-Scandinavian Foun-
dation. She was a member of the Board of Direc-
tors of the Federal Reserve Bank of Richmond,
Virginia from 1984-1990 and served as Chairman
in 1989-1990. Mrs. Merriman is Chairman of the
Audit Committee and is a member of the Nominat-
ing Committee of the Board of Directors.
Charles T. Munger, 70... Mr. Munger is Vice Chairman of Berkshire 1993
Hathaway Inc. (insurance, candy, retailing, man-
ufacturing and publishing) of which he has been
an officer and Director since 1975. He is Chair-
man of Daily Journal Corporation and is a Direc-
tor of Salomon Inc. and Wesco Financial Corpora-
tion. Mr. Munger is a member of the Audit Com-
mittee of the Board of Directors.
Frank L. Salizzoni, 55.. Mr. Salizzoni was elected President and Chief 1994
Operating Officer of the Company and USAir, ef-
fective April 1, 1994, and was elected to the
Board of Directors on May 25, 1994. Previously,
Mr. Salizzoni was Vice Chairman and Chief Finan-
cial Officer of Trans World Airlines and Trans
World Corporation until 1987, when he became
Vice Chairman and Chief Financial Officer of TW
Services, Inc. (food service). He was Chairman
and Chief Executive Officer of TW Services from
April 1987 until August 1989, just before that
company went private. Mr. Salizzoni was associ-
ated with Mancusco and Co. (investments) from
August 1989 until he was elected Executive Vice
President--Finance of the Company and of USAir
in November 1990. Mr. Salizzoni is a Director of
H&R Block, Inc., and SKF USA, Inc.
Seth E. Schofield, 54... Mr. Schofield is Chairman of the Board of Direc- 1989
tors and Chief Executive Officer of the Company
and USAir. He was elected Chairman of the Board
of Directors of the Company and USAir in June
1992. In June 1991 Mr. Schofield was elected
President and Chief Executive Officer of the
Company and of USAir. In June 1990 he was
elected President and Chief Operating Officer of
USAir. He had served as Executive Vice Presi-
dent--Operations of USAir since 1981. Mr. Scho-
field joined USAir in 1957 and has held various
corporate staff positions. Mr. Schofield is a
Director of the Erie Insurance Group, the PNC
Bank, N.A., USX Corp., the Greater Washington
Board of Trade, the Flight Safety Foundation,
and the Greater Pittsburgh Council of the Boy
Scouts of
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
America. Mr. Schofield is Chairman of the Board
of Directors of the Greater Pittsburgh Chamber
of Commerce, and a Board Member of the Pennsyl-
vania Business Roundtable, Penn's Southwest As-
sociation and the Virginia Business Council. He
is also a member of the Allegheny Conference on
Community Development and the Federal City Coun-
cil.
Raymond W. Smith, 56.... Mr. Smith is Chairman of the Board and Chief Ex- 1990
ecutive Officer of Bell Atlantic Company, which
is engaged principally in the telecommunications
business and is one of the seven regional compa-
nies formed as a result of the divestiture of
the Bell System. Previously, Mr. Smith had
served as Vice Chairman and President of Bell
Atlantic and Chairman of The Bell Telephone Com-
pany of Pennsylvania. He is a member of the
Board of Directors of CoreStates Financial Com-
pany, a trustee of the University of Pittsburgh
and is active in many civic and cultural organi-
zations. He is a member of the Compensation and
Benefits and Nominating Committees of the Board
of Directors.
Derek M. Stevens, 55.... Mr. Stevens has been Chief Financial Officer of 1993
and a Director of BA since 1989. Previously,
from 1981, he was Finance Director of TSB Group
plc (financial institution). Mr. Stevens is a
member of the Audit Committee of the Board of
Directors.
</TABLE>
The law firm of Paul, Hastings, Janofsky and Walker, with which Mr. Colodny
is affiliated on an Of Counsel basis, provided legal services to USAir during
1993 and is expected to provide such services during 1994.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held ten meetings in 1993. The Board of
Directors has established the following committees: Finance and Planning
Committee, Compensation and Benefits Committee ("Compensation Committee"),
Audit Committee and Nominating Committee. During 1993, the Finance and Planning
Committee held seven meetings, the Compensation Committee held three meetings,
the Audit Committee held seven meetings and the Nominating Committee held one
meeting.
The Compensation Committee reviews the salaries, incentive compensation,
stock option and restricted stock grants, retirement and other benefits which
accrue to officers of the Company and its subsidiaries. The Compensation
Committee makes recommendations to the Board of Directors concerning the
adequacy of existing and proposed levels of compensation and benefits.
The Audit Committee, in consultation with financial officers of the Company
and the independent public accountants, assists in establishing the scope of
the annual audit. The Audit Committee (1) reviews annual and quarterly
financial statements and periodic reports filed with the SEC, (2) recommends to
the Board of
10
<PAGE>
Directors the appointment of independent public accountants, (3) reviews the
annual programs of the internal audit staff and (4) reviews programs designed
to protect and maintain the assets of the Company, including insurance and
internal security programs.
The Nominating Committee is responsible for making recommendations regarding
the nomination of individuals for election to the Board of Directors. The
Nominating Committee will consider individuals recommended by stockholders. Any
such recommendation must be submitted in writing prior to January 1 of each
year, accompanied by a description of the proposed nominee's qualifications and
other relevant biographical information, and should be addressed to the
Nominating Committee, in care of the Secretary of the Company.
During 1993, each of the incumbent directors who served during that year
attended 75 percent or more of the meetings of the Board of Directors and of
the committees on which the director served, except Mr. Stevens who attended 71
percent of such meetings.
COMPENSATION OF DIRECTORS
Each incumbent director, except Messrs. Schofield and Salizzoni, is paid a
retainer fee of $18,000 per year for service on the Board of Directors of the
Company and a fee of $600 per Board meeting or committee meeting attended.
Consistent with a comprehensive cost reduction program at USAir, the retainer
fee was reduced by 20% to $14,400 for an eighteen-month period commencing
January 1, 1992 and ending on June 30, 1993. Mr. LeBuhn, Chairman of the
Finance and Planning Committee, Mr. DeVito, Chairman of the Compensation
Committee, and Mrs. Merriman, Chairman of the Audit Committee each receives an
additional fee of $2,000 per year for serving in those respective capacities.
Mr. Medlin, Chairman of the Nominating Committee, receives an additional fee of
$1,000 per year for serving in that capacity. Messrs. Schofield and Salizzoni
each receives a salary in his capacity as an officer of USAir and receives no
additional compensation as a director of the Company and USAir.
In 1987 the Company established a retirement plan for directors who are not
also employees of the Company and its subsidiaries. The plan provides that such
directors shall be eligible to receive retirement benefits thereunder if they
have attained seventy years of age and served at least five consecutive years
on the Board of Directors or, if they have not attained age seventy, have
served for at least ten consecutive years on the Board of Directors. Eligible
directors receive an annual retirement benefit equal to the highest annual
retainer in effect for active directors during the five years prior to
retirement. If the annual retainer for active directors is increased, the
annual retirement benefit paid to retired directors is increased by an amount
equal to 50% of the increase in retainer paid to active directors. If a
director dies prior to retirement and had served for at least five consecutive
years on the Board of Directors, the deceased director's surviving spouse is
eligible under the plan to receive, for a period of five years following such
death, an annual death benefit equal to 50% of the annual retainer paid to such
director at the time of his or her death. If a retired eligible director dies,
the director's surviving spouse is eligible under the plan to receive, for a
period of five years following such death, 50% of the annual retirement benefit
payable to the director at the time of his or her death. The plan is
administered by the Compensation Committee.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The Summary Compensation Table below sets forth the compensation paid during
the years indicated to each of the Chief Executive Officer and the four
remaining most highly compensated executive officers of the Company (including
its subsidiaries).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------
OTHER
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS(G) OPTIONS COMPENSATION(H)
------------------ ---- -------- ----- ------------ ---------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Seth E. Schofield(A).... 1993 $475,635(E) $0 $275,601(F) -- -- $ 64,302
Chairman, President and 1992 $412,981(E) $0 $174,792(F) -- 5,569 $ 38,495
Chief Executive Officer 1991 $466,827 $0 * -- 375,000 *
of the Company and of
USAir
W. Thomas Lagow(B)...... 1993 $310,058(E) $0 -- -- -- $282,521(I)
Executive Vice 1992 $234,258(E) $0 -- -- 153,211 $142,617(J)
President--Marketing of
USAir
Frank L. Salizzoni (C).. 1993 $317,558(E) $0 $ 45,374(F) -- -- $ 52,222
Executive Vice 1992 $231,249(E) $0 $ 26,892(F) -- 2,800 $ 34,382
President--Finance of 1991 $275,000 $0 * -- 150,000 *
the Company and of
USAir
James T. Lloyd.......... 1993 $257,365(E) $0 $ 73,215(F) -- -- $ 36,188
Executive Vice 1992 $211,058(E) $0 $ 47,974(F) -- 2,492 $ 21,382
President, General 1991 $246,096 $0 * -- 150,000 *
Counsel and Secretary
of the Company;
Executive Vice
President and General
Counsel of USAir
Michael R. Schwab (D)... 1993 $257,365(E) $0 $ 27,621(F) -- -- $ 30,067
Executive Vice 1992 $211,058(E) $0 $ 18,720(F) -- 2,492 $ 40,935(K)
President--Operations 1991 $222,308 $0 * -- 150,000 *
of USAir
</TABLE>
- - --------
* Under the SEC's transition rules, no disclosure is required.
(A) Mr. Schofield was elected Chief Executive Officer effective June 1, 1991.
(B) Mr. Lagow's employment with USAir commenced on February 7, 1992.
(C) Mr. Salizzoni was named President and Chief Operating Officer of the
Company and USAir effective April 1, 1994.
(D) Mr. Schwab resigned from USAir on April 15, 1994.
(E) Amounts disclosed reflect reductions in salary during (i) 1993 of $24,365,
$14,942, $12,250, $10,904 and $10,904, and (ii) 1992 of $87,019, $49,272,
$43,750, $38,942 and $38,942 for Messrs. Schofield, Lagow, Salizzoni,
Lloyd and Schwab, respectively, which were implemented for all USAir
officers for a fifteen-month period commencing on January 1, 1992 and
ending on March 29, 1993 pursuant to a comprehensive cost reduction
program at USAir.
(F) Amounts disclosed include for (i) 1993, $271,288, $33,259, $73,215, and
$27,621 and (ii) 1992, $171,410, $22,523, $47,974 and $16,784, received by
Messrs. Schofield, Salizzoni, Lloyd and Schwab, respectively, to cover
incremental tax liability resulting from income derived from the lapsing
of restrictions on disposition of Restricted Stock. Any amounts disclosed
in the column that are in excess of the amounts disclosed in the preceding
sentence represent income derived from personal travel on USAir.
(G) At December 31, 1993, Messrs. Schofield, Salizzoni, Lloyd and Schwab owned
30,000, 6,000, 4,000 and 3,200 shares of Restricted Stock, respectively.
At the fair market value of the Common Stock on that date, these holdings
of Restricted Stock were valued at $386,250, $77,250, $51,500, $41,200,
respectively.
(H) Under USAir's split dollar life insurance plan, described under
"Additional Benefits" below, individual life insurance coverage is
available to the named officers. During 1992, each officer paid the amount
of the premium associated with the term life component of the coverage. In
1993, USAir commenced paying the premium associated with this coverage. In
1992 and 1993, USAir paid the remainder of the premium associated with the
whole life component of the coverage. If all assumptions as to life
expectancy and other factors occur in accordance with projections, USAir
expects to recover the premiums it pays with respect to the whole life
component of the coverage. The following amounts reflect the value of the
benefits accrued during the years indicated, calculated on an actuarial
basis, ascribed to the insurance policies purchased on the lives of the
named officers (plus, with respect to 1993, the dollar value of premiums
paid by USAir with respect to term life insurance): 1993--Mr. Schofield--
$29,328, Mr. Lagow--$9,716, Mr. Salizzoni--$26,010, Mr. Lloyd--$17,291 and
Mr. Schwab--$11,170; 1992--Mr. Schofield--$38,495; Mr. Lagow--$12,902; Mr.
Salizzoni--$34,382; Mr. Lloyd--$21,382 and Mr. Schwab--$15,555. During
1993, USAir made contributions of $34,974, $22,805, $26,212, $18,897 and
$18,897 to the accounts of Messrs. Schofield, Lagow, Salizzoni, Lloyd and
Schwab in certain defined contribution pension plans.
(I) Upon the commencement of his employment, USAir agreed to pay Mr. Lagow $1
million over four years, which amount was intended to compensate him for
restricted stock and stock options which he forfeited when he left his
former employer. The amount disclosed includes the first installment,
$250,000, of the total payment.
(J) Amount disclosed also reflects $125,000 paid to Mr. Lagow in the form of a
"sign-on bonus" and $4,715 for reimbursement of relocation expenses.
(K) Amount disclosed also reflects $25,380 for reimbursement of relocation
expenses.
12
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on the number of options held by the
named executive officers at fiscal year-end 1993. None of the officers
exercised any options during 1993 and none of the unexercised options held by
these officers were in-the-money based on the fair market value of the Common
Stock on December 31, 1993 ($12.875). Mr. Schwab resigned from USAir on April
15, 1994.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS/SARS
AT FISCAL YEAR-END
-------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Seth E. Schofield.................................... 170,069 225,000
W. Thomas Lagow...................................... 33,211 120,000
Frank L. Salizzoni................................... 62,800 90,000
James T. Lloyd....................................... 79,742 84,250
Michael R. Schwab.................................... 77,992 87,000
</TABLE>
RETIREMENT BENEFITS
Prior to 1993, USAir's Retirement Plan (the "Retirement Plan") for its
salaried employees was comprised of two qualified plans. The Retirement Plan
was designed so that the two plans, when aggregated, would provide
noncontributory benefits based upon both years of service and the employee's
highest three-year average annual compensation (up to a maximum of $235,840 in
1993) during the last ten calendar years of service, including any incentive
compensation awards. The primary plan is a defined benefit plan which provides
a benefit based on the factors mentioned above. The primary plan is integrated
with the Social Security program so that the benefits provided thereunder are
reduced by a portion of the employee's benefits from Social Security. USAir's
contributions to the primary plan are not allocated to the account of any
particular employee. The primary plan was frozen on December 31, 1991, and
accordingly, retirement benefits payable under the plan were determinable on
that date.
The secondary plan is a target benefit defined contribution plan. The
secondary plan was established in 1983 as a result of changes to the Internal
Revenue Code (the "Code"), which lowered the maximum benefit payable from a
defined benefit plan. In the event that the benefit produced under the primary
plan formula cannot be accrued for any employee covered by such plan because of
the limit on benefits payable under defined benefit plans, contributions will
be made on behalf of such employee to the secondary plan. Such contributions
will be calculated to provide the benefit produced under the formula in the
primary plan in excess of such limit, to the extent permitted under the Code's
limitation on the contributions to defined contribution plans. USAir's
contributions to the secondary plan are allocated to individual employees'
accounts. During 1993, no contributions were made to any executive officer's
account. The secondary plan was also frozen on December 31, 1991.
Under the Retirement Plan, benefits usually begin at the normal retirement
age of 65. The Retirement Plan also provides benefits for employees electing
early retirement from ages 55 through 64. If such an election is made, the
benefits may be reduced to reflect the longer interval over which the benefits
will be paid. Executive officers participate in the Retirement Plan on the same
basis as other employees of USAir.
Contributions to and benefits payable under the Retirement Plan must be in
compliance with the applicable guidelines or maximums established by the Code.
USAir has adopted an unfunded supplemental plan which will provide those
benefits which would otherwise be payable to officers under the Retirement
13
<PAGE>
Plan, but which, under the Code, are not permitted to be funded or paid through
the qualified plans maintained by USAir. Benefit accruals under the
supplemental plan also ceased upon the freezing of the Retirement Plan on
December 31, 1991. Such supplemental plan provides that any benefits under the
unfunded supplemental plan will be paid in the form of a single, lump sum
payment. Such supplemental plans are specifically provided for under applicable
law and have been adopted by many corporations under similar circumstances.
Messrs. Schofield, Salizzoni, Lloyd and Schwab are currently entitled to
receive retirement benefits in excess of the limitations established by the
Code.
The following table presents the noncontributory benefits payable per year
for life to employees under the Retirement Plan and the unfunded supplemental
plan described above, assuming normal retirement in the current year. The table
also assumes the retiree would be entitled to the maximum Social Security
benefit in addition to the amounts shown.
<TABLE>
<CAPTION>
FINAL EARNINGS NONCONTRIBUTORY PENSION BASED ON YEARS OF SERVICE
AS DEFINED IN -----------------------------------------------------
THE PLAN 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- - -------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................. $ 19,871 $ 29,806 $ 39,742 $ 49,677 $ 54,677 $ 54,677
200,000................. 43,871 65,806 87,742 109,677 119,677 119,677
300,000................. 67,871 101,806 135,742 169,677 184,677 184,677
400,000................. 91,871 137,806 183,742 229,677 249,677 249,677
500,000................. 115,871 173,806 231,742 289,677 314,677 314,677
600,000................. 139,871 209,806 279,742 349,677 379,677 379,677
700,000................. 163,871 245,806 327,742 409,677 444,677 444,677
800,000................. 187,871 281,806 375,742 469,677 509,677 509,677
</TABLE>
The values reflected in the above chart represent the application of the
Retirement Plan formula to the specified amounts of compensation and years of
service. The credited years of service under the Retirement Plan for each of
the individuals included in the Summary Compensation Table are as follows: Mr.
Schofield--30 years, Mr. Lagow--none, Mr. Salizzoni--1 year, Mr. Lloyd--5 years
and Mr. Schwab--5 years.
USAir has entered into agreements with Messrs. Lagow, Salizzoni, Lloyd and
Schwab which provide for a supplement to their retirement benefits under the
Retirement Plan. This supplement is designed to provide such persons with those
benefits they would have received had they been employed by USAir for the
minimum number of years to be entitled to full retirement benefits under the
Retirement Plan. Mr. Schwab resigned from USAir on April 15, 1994.
USAir adopted, effective January 1, 1993, a defined contribution retirement
program for its eligible non-contract employees (the "Retirement Savings Plan")
as a replacement for the Retirement Plan described above. Under the Retirement
Savings Plan, eligible employees may elect to contribute on a tax-deferred
basis up to 13% of their pre-tax compensation, subject to a maximum annual
contribution of $8,994 in 1993. USAir will also contribute to each employee's
account in the Retirement Savings Plan (i) a matching contribution equal to 50%
of each employee's contribution, subject to a maximum of 2% of the employee's
annual pre-tax compensation, (ii) a basic contribution which ranges, depending
on the employee's age, from 2% to 8% of the employee's annual pre-tax
compensation and (iii) if USAir's pre-tax profit margin, as defined, exceeds
certain thresholds, a profit sharing contribution up to a maximum of 7.5% of an
employee's annual pre-tax compensation. USAir made no contributions under the
profit sharing component of the Retirement Savings Plan in 1993. Pre-tax
compensation is defined for purposes of the Retirement Savings Plan as all
compensation which USAir must report as wages on an employee's Form W-2, plus
an employee's tax
14
<PAGE>
deferred contributions under such Plan up to a maximum of $235,840 in 1993.
USAir also established a non-qualified supplemental defined contribution plan
(the "Supplemental Savings Plan") in 1993, which credits amounts to accounts of
certain officers who participate in the Retirement Savings Plan but who are
adversely affected by the maximum benefit limitations under qualified plans
imposed by the Code. Amounts obligated to be paid by USAir under the
Supplemental Savings Plan will be deposited in a trust established for the
benefit of the participants. See the "All Other Compensation" column of the
Summary Compensation Table for the amounts contributed or allocated in 1993 to
Messrs. Schofield, Lagow, Salizzoni, Lloyd and Schwab under the Retirement
Savings Plan and the Supplemental Savings Plan.
Under the Retirement Savings Plan and the Supplemental Savings Plan,
participants may direct the investment of their contributions and USAir's
contributions to their accounts among certain investment funds. Participants'
contributions are fully vested when made. USAir's contributions vest when the
participant has been employed by USAir for at least two years.
ADDITIONAL BENEFITS
USAir has in effect an Officers' Supplemental Benefit Plan, which provides
certain benefits to a current or retired officer's spouse and children under
age 19 following the officer's death. These benefits include: (i) dependent
survivors' monthly income benefit and (ii) dependent survivors' health care
insurance.
A dependent survivors' monthly income benefit is payable to the eligible
spouse or children of a deceased officer or retired officer in an amount equal
to 20% of the monthly basic rate of salary payable to the officer the day prior
to death or, in the case of a deceased retired officer, the day prior to
retirement. Monthly income benefits will be reduced by the amount of any spouse
protection benefit payable from Retirement Plan funds, and are subject to
cessation upon the occurrence of certain specified events. In no case are
monthly income benefits payable for more than 19 years following the date of
death.
The eligible surviving spouse or children of a deceased officer or retired
officer are also entitled to receive dependent survivors' health care
insurance, which provides the medical, major medical and dental insurance
benefits generally available to dependents of salaried employees of USAir.
Eligibility for this coverage ceases upon the occurrence of certain specified
events.
USAir also maintains a split-dollar life insurance plan under which
individual term life insurance is available to its officers in the amount of
three times base salary. The plan also provides for accrual of a cash value
component for each officer who holds a policy. Under the plan, during 1993,
USAir paid the premiums on the term and whole life insurance components of the
policy. The premium attributable to the term life insurance of the policy is
treated as income to the participant. At death, prior to transfer of the policy
to the participant, the beneficiary receives the amount of the coverage less
any amount necessary to reimburse the employer for its investment, and the
beneficiary is entitled to any additional proceeds. Upon transfer of the policy
to the participant, the participant is entitled to the cash surrender value of
the policy in excess of the amount payable to the employer for recovery of its
investment. See the "All Other Compensation" column of the Summary Compensation
Table for information concerning compensation with respect to Messrs.
Schofield, Lagow, Salizzoni, Lloyd and Schwab that was attributable to the
split dollar life insurance plan.
ARRANGEMENTS CONCERNING TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
USAir currently has employment contracts (the "Employment Contracts") with
the executive officers (the "Executives") named in the Summary Compensation
Table, except for Mr. Schwab who resigned on
15
<PAGE>
April 15, 1994. The terms of the Employment Contracts extend until the earlier
of the fourth anniversary thereof or the Executive's normal retirement date and
are subject to automatic one-year annual extentions on each anniversary date
(to the fourth anniversary of such anniversary date) unless advance written
notice is given by USAir. In exchange for each Executive's commitment to devote
his or her full business efforts to USAir, the agreements provide that each
Executive will be re-elected to a responsible executive position with duties
substantially similar to those in effect during the prior year and will receive
(1) an annual base salary at a rate not less than that in effect during the
previous year, (2) incentive compensation as provided in the contract and (3)
insurance, disability, medical and other benefits generally granted to other
officers. In the event of a change of control, as defined in each Employment
Contract, the term of each Employment Contract is automatically extended until
the earlier of the fourth anniversary of the change of control date or the
Executive's normal retirement date. As a result of amendments to the Employment
Contracts entered into in June 1992, the acquisition of 20% or more of the
outstanding securities of the Company under circumstances in which the acquiror
would obtain the power to elect 20% or more of the members of the Board of
Directors was added to the definition of a change of control under the
Employment Contracts. To the extent permitted by Foreign Ownership Restrictions
and assuming the consummation of the Second Purchase (the "Second Closing")
results in BA's electing at least 20% of the Board of Directors, the Second
Closing would be treated as a change of control and would result in extension
of the term of each Employment Contract until the earlier of the fourth
anniversary of the Second Closing or the Executive's normal retirement date. On
March 7, 1994, BA announced that it would not make any additional investments
in the Company until the outcome of measures to reduce the Company's costs and
improve its financial results is known.
The Employment Contracts provide that, should USAir or any successor fail to
re-elect the Executive to his or her position, assign the Executive to
inappropriate duties which result in a diminution in the Executive's position,
authority or responsibilities, fail to compensate the Executive as provided in
the Employment Contract, transfer the Executive in violation of the Employment
Contract, fail to require any successor to USAir to comply with the Employment
Contract or otherwise terminate the Executive's employment in violation of the
Employment Contract, the Executive may elect to treat such failure as a breach
of the Employment Contract if the Executive then terminates employment. As
liquidated damages as the result of an event not following a change of control
that is deemed to be a breach of the Employment Contracts, USAir or its
successor would be required to pay the Executive an amount equal to his or her
annual base salary for the then remaining term of the Employment Contract, and
to continue granting certain employee benefits for the then remaining term of
the Executive's Employment Contract. If the breach follows a change of control,
the Executive would be entitled to receive (i) an amount equal to the product
of three times the sum of the Executive's annual base salary plus an annual
bonus, (ii) a lump sum equal to the actuarial equivalent of the pension
benefits which the Executive would have received had he or she remained
employed by USAir until the end of the term of the Employment Contract, (iii)
medical benefits until such time as the Executive qualifies for group medical
benefits from another employer, (iv) travel benefits for the Executive's life,
(v) reimbursement of reductions in salary sustained by the Executive as a
result of a comprehensive cost reduction program initiated by USAir in October
1991, and (vi) continuation of certain other benefits during the remainder of
the term of the Employment Contract. In addition, except under the
circumstances described in the immediately following paragraph, during the 30-
day period immediately following the first anniversary of a change of control
any Executive could elect to terminate his or her Employment Contract for any
reason and receive the liquidated damages described in the immediately
preceding sentence. Each Employment Contract provides that if USAir breaches
the Employment Contract, as described above, each Executive shall be entitled
to recover from USAir reasonable attorney's fees in connection with enforcement
of such Executive's rights under the Employment Contract. Each Employment
Contract also provides that any payments the Executive receives in the event of
a termination shall be increased, if necessary, such that,
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after taking into account all taxes he or she would incur as a result of such
payments, the Executive would receive the same after-tax amount he or she would
have received had no excise tax been imposed under Section 4999 of the Code.
In order to facilitate consummation of the acts and transactions contemplated
by the Investment Agreement, the Executives agreed in January 1993 to an
amendment to their Employment Contracts that will become effective upon the
Second Closing (i) to eliminate their right to elect to terminate their
Employment Contracts without any reason during the 30-day period immediately
following the first anniversary of the Second Closing; (ii) that USAir may
transfer the Executive's employment to any location that meets certain criteria
in the Employment Contracts without such relocation constituting a breach of
the Employment Contracts; (iii) that consummation of the Second Closing would
be treated as the only change of control with respect to BA; and (iv) that
following the Second Closing, USAir may make certain changes in benefit plans
affecting the Executives that are not material, as that term is defined in the
Employment Contracts, provided that the changes apply to all eligible officers
of USAir and are approved by a majority of the directors of the Company not
elected by BA. As discussed above, BA announced on March 7, 1994 that it will
not make any additional investments in the Company under current circumstances.
Currently, under the Company's 1984 Stock Option and Stock Appreciation
Rights Plan (the "1984 Plan") and 1988 Stock Incentive Plan (the "1988 Plan,"
and together with the 1984 Plan, the "Plans"), pursuant to which employees of
the Company and its subsidiaries have been awarded stock options and stock
appreciation rights with respect to Common Stock and, in the case of the 1988
Plan, shares of Restricted Stock, occurrence of a change of control, as
defined, would make all granted options immediately exercisable without regard
to the vesting provisions thereof. In addition, grantees would be able, during
the 60-day period immediately following a change of control (the "Cash-out
Right"), to surrender all unexercised stock options not issued in tandem with
stock appreciation rights under the Plans to the Company for a cash payment
equal to the excess, if any, of the fair market value of the Common Stock over
the exercise prices of such stock options or the positive value of any stock
appreciation rights. As described above, in June 1992, the Company amended the
definition of a change of control in the Plans with the result that, to the
extent permitted by Foreign Ownership Restrictions and assuming the Second
Closing results in BA's electing at least 20% of the Board of Directors, the
Second Closing would be treated as a change of control thereunder. As of March
31, 1994, there were unexercised stock options to purchase 538,110 shares of
Common Stock (of which 83,200 had tandem stock appreciation rights) under the
1984 Plan and unexercised stock options to purchase 3,557,000 shares of Common
Stock (none of which had tandem stock appreciation rights) under the 1988 Plan.
(As of March 31, 1994, 3,166,400 of the 3,557,000 options outstanding under the
1988 Plan and 313,510 of the 538,110 options outstanding under the 1984 Plan
were exercisable pursuant to their normal vesting schedule.) As of March 31,
1994, the weighted average exercise price of all the outstanding stock options
was approximately $23.12. On March 31, 1994, the closing price of a share of
Common Stock on the New York Stock Exchange was $8.00. See the "Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values"
table for information regarding stock options held by the Executives named in
that table.
As of March 31, 1994, 50,400 shares of Restricted Stock previously granted to
the Executives may (i) become free of transfer restrictions upon their normal
vesting schedule or (ii) be subject to accelerated vesting upon a termination
of employment which triggers the payment of liquidated damages under the
Employment Contracts, as discussed above, regardless of whether the termination
occurred following a change of control as defined in the Employment Contracts.
See "Beneficial Security Ownership" for information regarding Restricted Stock
owned by the Executives.
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With respect to Mr. Lagow, in order to induce him to accept its offer of
employment in 1992, USAir agreed, among other things, to pay Mr. Lagow $1
million in four equal installments, each installment being due and payable on
the first four anniversaries of the commencement of his employment by USAir,
provided Mr. Lagow remains employed by USAir. This payment was intended to
compensate Mr. Lagow for stock options and restricted stock which he forfeited
when he left his former employer. In the event of a change of control under his
Employment Contract or wrongful termination thereunder, USAir has also agreed
to pay Mr. Lagow in a lump sum any unpaid balance of this obligation.
Notwithstanding anything to the contrary set forth in any of the Company's or
USAir's filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that incorporates by reference this Proxy Statement, in whole or in part, the
following Report and Performance Graph shall not be incorporated by reference
into any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee policies with respect to compensation of the
Company's executive officers are to:
1. Attract and retain talented and experienced senior management by
offering compensation that is competitive with respect to other major U.S.
airlines and other U.S. companies of comparable size.
2. Motivate senior management to provide a high-quality product to
consumers with the ultimate goal of maximizing profitability and
stockholder returns by offering incentive and long-term compensation that
is linked to return on sales and the market value of the Common Stock.
The Compensation Committee has played an active role in the oversight and
review of all executive compensation paid to executive officers of the Company
during the last fiscal year. Ordinarily, the Compensation Committee and the
full Board of Directors, in consultation with the Senior Vice President--Human
Resources of USAir and, if warranted, an independent compensation consultant,
annually review the total compensation package (comprised of base salary,
incentive compensation, and long-term incentive compensation) of the Chairman,
President and Chief Executive Officer. The Compensation Committee reviews the
market rate for peer-level positions of the other major domestic passenger
carriers including, but not limited to, the three other airline companies
included in the S&P Airline Index, which is reflected in the "Performance
Graph." Based primarily on this comparison, the Compensation Committee
establishes the Chief Executive Officer's base salary. Mr. Schofield does not
participate in Compensation Committee or Board of Directors deliberations or
decision-making regarding any aspect of his compensation.
Correspondingly, the Compensation Committee established the compensation
reported for 1993 for the Company's other executive officers, including the
four officers named in the Summary Compensation Table, based upon a comparison
of peer positions at the other major U.S. airlines including, but not limited
to, the three other airline companies included in the S&P Airline Index, which
is reflected in the "Performance Graph."
The principal elements of the Company's compensation paid to the executive
officers in the last completed fiscal year are discussed below.
Base Salary. As part of a comprehensive program to reduce costs at USAir, the
Compensation Committee reduced the salaries of the executive officers and the
other officers of USAir for a fifteen month period commencing on January 1,
1992 and ending on March 29, 1993. The Compensation Committee reduced each
executive's base salary in accordance with the following graduated schedule:
. First $20,000 of salary reduced by 0%
. Next $30,000 of salary reduced by 10%
($20,000 to $50,000)
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. Next $50,000 of salary reduced by 15%
($50,000 to $100,000)
. Any amount of salary in excess of $100,000 reduced by 20%.
Each of the executive officers agreed to the reductions in salary, which
otherwise would have constituted grounds for the executives to have terminated
their employment agreements with USAir. The amounts of salary not paid in 1992
and 1993 to Mr. Schofield and the other four executive officers named in the
Summary Compensation Table are disclosed in footnote (E) to that table.
As stated above, the Compensation Committee establishes the base salaries of
the Company's executive officers primarily by reference to the salaries of
officers holding comparable positions at other major U.S. airlines including,
but not limited to, the three other airline companies included in the S&P
Airline Index, which is reflected in the "Performance Graph." Historically, the
Compensation Committee had awarded merit increases based on measuring
individual performance against objectives. However, due to the Company's poor
financial performance, the Compensation Committee last awarded merit increases
in executive base salaries in 1989. Since 1989 the Compensation Committee had
increased the salaries of executive officers solely as a result of a promotion
or an increase in responsibilities. The Company commissioned an independent
compensation consultant to conduct a comprehensive study of the salaries of
comparable airline officers in 1992. The study disclosed that the salaries
(prior to the fifteen-month reduction described above) of most officers were
substantially below those of salaries for analogous positions at major
competitors. Following the study, in July 1992, the Compensation Committee
prospectively set the salaries of executive officers generally at the median of
the comparative range adjusted by individual performance and experience,
effective April 1993.
In connection with the same review, the Compensation Committee proposed to
increase Mr. Schofield's base salary (before adjustment for the fifteen-month
salary reductions) from $500,000 to $590,000, effective April 1993. Because the
Company has continued to sustain losses, Mr. Schofield declined to accept the
increase in base salary.
Annual Cash Incentive Compensation Program: The Compensation Committee
adopted the Executive Incentive Compensation Plan effective on January 1, 1988.
The plan is administered by the Compensation Committee. All officers, including
executive officers, of the Company are eligible to participate in this plan.
The Compensation Committee is authorized to grant awards under this plan only
if the Company achieves for a fiscal year a two percent or greater return on
sales ("ROS"). The target level of performance is four percent ROS. If the
Company achieves the target performance of four percent ROS, the full target
percentage (which varies depending on position) is applied against the
individual's base salary for the year to determine the target bonus award (the
"Target Award") for the individual.
Target Awards for executive officers range between 30% and 50% of base
salary. If the minimum level of performance of two percent ROS is achieved, 50%
of the Target Award would be available for distribution. If the maximum level
of performance of six percent ROS is achieved, 200% of the Target Award would
be available for payment. The Compensation Committee may adjust awards made to
executive officers based on individual performance; however, no award may
exceed 250% of the Target Award for any individual. The Compensation Committee
last approved payments to executive officers under this plan for the fiscal
year ended December 31, 1988. The Company has not achieved the minimum two
percent ROS in any fiscal year, and the Compensation Committee has not made any
awards under the plan, since then.
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Long-Term Incentive Programs
Stock Options: The executive officers of the Company participate in the
Company's 1984 Stock Option and Stock Appreciation Rights Plan (the "1984
Plan") and 1988 Stock Incentive Plan (the "1988 Plan", and together with the
1984 Plan, the "Plans") which are both administered by the Compensation
Committee. The Compensation Committee is authorized to grant options under
these Plans only at an exercise price equal to the fair market value of a share
of Common Stock on the date of grant. During 1993, the Compensation Committee
did not grant any options from either of the Plans to the executive officers.
The Compensation Committee determines the size of any option grant under the
Plans based upon (i) the Compensation Committee's perceived value of the grant
to motivate and retain the individual executive, (ii) a comparison of long-term
incentive practices within the commercial airline industry, (iii) a comparison
of awards provided to peer executives within the Company and (iv) the number of
outstanding options held by the grantee and the exercise prices of these
options. Although the Compensation Committee supports and encourages stock
ownership in the Company by executive officers, it has not promulgated any
standards regarding levels of ownership by executive officers.
Pursuant to the reductions in the executive officers' salaries discussed
above, in 1992 the Compensation Committee granted these persons non-qualified
stock options to purchase 50 shares of Common Stock at $15 per share for each
$1,000 of salary foregone during the wage reduction program, as is the case for
each USAir employee whose pay was reduced pursuant to the program.
Restricted Stock. The Compensation Committee did not award any Restricted
Stock under the 1988 Plan during 1993. (Grants of Restricted Stock are not
authorized under the 1984 Plan). From 1988-1990, the Compensation Committee
granted Restricted Stock to a total of nine executive officers, some of whom
are no longer employed by USAir.
During 1993, restrictions on disposition expired on a total of 23,200 shares
of Restricted Stock held by Mr. Schofield, which shares were originally granted
between 1988 and 1990. Restrictions on disposition also lapsed during 1993 on a
total of 10,900 shares of Restricted Stock held by Messrs. Salizzoni, Lloyd and
Schwab, which shares were originally granted between 1988 and 1990.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code. Section 162(m) provides that companies will not be
entitled to a tax deduction for certain compensation paid to any executive
officer to the extent that the compensation exceeds $1 million in a taxable
year. The Compensation Committee is studying Section 162(m) and the proposed
rules thereunder and is in the process of determining whether to recommend that
the Company take the necessary measures to conform its compensation to Section
162(m)
The Compensation Committee will continue to review all compensation and
benefit matters presented to it and will act based upon the best information
available in the best interests of the Company, its stockholders and employees.
Mathias J. DeVito, Chairman Roger P. Maynard
George J. W. Goodman John G. Medlin, Jr.
John W. Harris Raymond W. Smith
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PERFORMANCE GRAPH
The preceding graph compares the performance of the Company's Common Stock
during the period January 1, 1989 to December 31, 1993 with the S&P 500 Index
and the S&P Airline Index. The graph depicts the results of investing $100 in
the Company's Common Stock, the S&P 500 Index and the S&P Airline Index at
closing prices on December 31, 1988. The stock price performance shown on the
graph above is not necessarily indicative of future price performance. The S&P
Airline Index consists of AMR Corporation, Delta Air Lines, Inc., UAL
Corporation and the Company.
SELECTION OF AUDITORS (ITEM NO. 2)
The Board of Directors of the Company has named KPMG Peat Marwick as
independent public accountants to examine the financial statements of the
Company for fiscal year 1994, subject to ratification and approval by the
stockholders. KPMG Peat Marwick acted in the same capacity during the past
year. A representative from that firm is expected to be present at the annual
meeting of stockholders and will be afforded an opportunity to make a statement
if the representative desires to do so and to respond to appropriate questions.
Fees for KPMG Peat Marwick's 1993 services will amount to approximately
$973,800, including $517,500 for the examination of financial statements and
issuance of reports in compliance with debt or other agreements relating to
annual audited financial statements and $456,300 for limited reviews of interim
financial statements, consultation and assistance on accounting, tax, and
related matters, services performed in connection with preparation of
registration statements and examination of financial statements of employee
benefit plans.
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REVERSION OF CERTAIN SHARES OF COMMON STOCK AUTHORIZED AND RESERVED UNDER
CERTAIN EMPLOYEE BENEFIT PLANS TO AUTHORIZED, UNISSUED AND UNRESERVED COMMON
STOCK (ITEM 3)
Under the Company's 1992 Stock Option Plan (the "1992 Plan") and 1981
Employee Stock Purchase Plan, as amended (the "ESPP"), as of March 31, 1994,
approximately 3,097,000 and 3,342 shares of Common Stock, respectively, remain
authorized and reserved for issuance to employees. The Company does not intend
to grant options to purchase, or issue, any additional shares of Common Stock
under the 1992 Plan (except for minor grants of options to certain employees
who have not participated to date in the temporary salary and wage reductions
described below) and the ESPP and seeks stockholder authorization for reversion
of any reserved shares not underlying granted options to the status of
authorized, unissued and unreserved Common Stock. The 1992 Plan and the ESPP do
not provide for the automatic reversion of shares authorized and reserved for
issuance thereunder to the status of authorized, unissued and unreserved Common
Stock under these circumstances. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock, Series A Preferred Stock,
Series F Preferred Stock and Series T Preferred Stock, voting as a single
class, present in person or represented by proxy at the annual meeting and
entitled to vote is required to approve this proposal.
The 1992 Plan was presented to, and approved by, the Company's stockholders
at the Company's 1992 annual meeting of stockholders. At that time, 8,125,000
shares of Common Stock were authorized and reserved for issuance under the 1992
Plan. Issuances of options to purchase Common Stock under the 1992 Plan are
restricted to the purpose of compensating USAir employees for certain temporary
salary and wage reductions implemented by USAir in 1992-1994. Under the 1992
Plan, the Company granted options to purchase Common Stock at $15 per share to
employees whose salaries or wages were reduced, at the rate of 50 options for
each $1,000 of salary or wage forgone. Options generally became or will become
exercisable on the first anniversary of their grant. As of March 31, 1994, the
Company had granted options to purchase approximately 5,028,000 shares of
Common Stock under the 1992 Plan. The Company did not grant options to purchase
all of the 8,125,000 shares of Common Stock authorized for issuance under the
1992 Plan because certain of the labor cost savings sought by USAir were
obtained through changes in productivity and other measures.
The ESPP was presented to, and approved by, the Company's stockholders at the
1981 annual meeting of stockholders. At that time, 700,000 shares of Common
Stock were approved for issuance thereunder. The Company's stockholders
subsequently approved amendments to the ESPP at the 1986 annual meeting and at
the 1988 annual meeting to authorize an additional 700,000 and 2,500,000
shares, respectively, for issuance thereunder. The primary purposes of the ESPP
were to attract qualified persons to join USAir as employees and to align more
closely the interests of stockholders and employees by providing employees with
the opportunity to purchase Common Stock at a small discount from the market
price without paying a brokerage commission. In addition, the net proceeds of
the sales of Common Stock under the ESPP were added to the Company's working
capital. As of March 31, 1994, 3,896,658 shares of Common Stock had been issued
to employees under the ESPP and only 3,342 shares of Common Stock remained
available for issuance thereunder. The Company has not conducted an offering
under the ESPP since 1992 and has no intention to effect any additional
offerings. Since 1988, when the ESPP was last amended, USAir has established an
employee stock ownership plan, the Company has granted a substantial number of
options under the 1992 Plan as described above and employees have been given
the opportunity to purchase Common Stock through an investment fund available
under certain defined contribution pension plans.
As of March 31, 1994, the Company had 150 million shares of Common Stock
authorized under its restated certificate of incorporation, as amended (the
"Charter"). At the same date, 59,412,312 shares of Common Stock were
outstanding (exclusive of 1,667,376 shares held in treasury), approximately
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52,616,244 shares were reserved for issuance on conversion of outstanding
convertible securities and pursuant to various employee benefit plans
(including the 1992 Plan and the ESPP) and approximately 37,971,444 shares were
authorized, unissued and unreserved. If the stockholders approve this proposal,
the number of authorized shares of Common Stock that are unissued and
unreserved will increase by approximately 3,100,000, depending on the number of
additional options that may be granted under the 1992 Plan, which the Company
expects would be insignificant. The Board of Directors could issue the
additional unissued and unreserved shares at its discretion for such purposes
as raising additional capital, establishing other employee benefit plans or
acquiring assets, although it has no current plans to do so. IT SHOULD BE
EMPHASIZED THAT THE PROPOSAL DOES NOT HAVE THE EFFECT OF AMENDING THE CHARTER
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK. The Company's
stockholders most recently approved an increase in the authorized number of
shares of Common Stock at the 1993 annual meeting.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS URGES YOU TO VOTE FOR
THIS PROPOSAL (ITEM NO. 3).
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL RELATING TO "TERM LIMITATION" ON DIRECTORS (ITEM NO. 4)
Mrs. Evelyn Y. Davis, The Watergate Office Building, 2600 Virginia Avenue,
N.W., Washington, D.C. 20037, who owns 250 shares of the Common Stock, has
advised the Company of her intention to introduce the following resolution at
the annual meeting. To be adopted, this resolution, which is opposed by the
Board of Directors, would require the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock, Series A
Preferred Stock, Series F Preferred Stock and Series T Preferred Stock, voting
as a single class, present in person or represented by proxy and entitled to
vote at the annual meeting.
"RESOLVED: That the stockholders of USAir Group recommend that the Board
take the necessary steps so that future outside directors shall not serve
for more than six years."
SUPPORTING STATEMENT OF THE PROPONENT
"The President of the U.S.A. has a term limit, so do Governors of many
states.
"Newer directors may bring in fresh outlooks and different approaches with
benefits to all shareholders.
"No director should be able to feel that his or her directorship is until
retirement.
"Last year the owners of 2,289,509 shares, representing approximately 4.9%
of the shares voting, voted for this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company believes that approval of the stockholder resolution would not be
in the best interests of the Company and its stockholders and urges
stockholders to vote against the resolution.
The Nominating Committee of the Board of Directors, which is composed
entirely of independent directors, reviews and recommends director nominees for
consideration by the full Board of Directors. The Board of Directors, in turn,
recommends for stockholder consideration and approval a slate of director
nominees who are selected because of their experience, diversity and their
contribution to the Company. The stockholders vote on the slate of nominees
annually and are free to withhold their vote for any nominees or,
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if they choose, for the entire slate. In light of this process of annual
selection and stockholder approval, the Company believes that a restriction on
the number of years of Board of Directors service is unnecessary. The Company
also believes that Board of Directors continuity and experience are of
significant value in guiding the affairs of the Company, and this value should
not be impaired by an arbitrary limit on a Director's service.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 4).
STOCKHOLDER PROPOSAL CONCERNING CONFIDENTIAL VOTING (ITEM NO. 5)
The New York City Police Pension Fund, One Centre Street, New York, New York
10007-2341, which owns 8,600 shares of the Company's Common Stock, has advised
the Company of its intention to introduce the following resolution at the
annual meeting. To be adopted, this resolution, which is opposed by the Board
of Directors, would require the affirmative vote of the holders of a majority
of the outstanding shares of the Company's Common Stock, Series A Preferred
Stock, Series F Preferred Stock and Series T Preferred Stock, voting as a
single class, present in person or represented by proxy and entitled to vote at
the annual meeting.
"RESOLVED, that the shareholders of the Company request that the board of
directors adopt and implement a policy requiring all proxies, ballots and
voting tabulations that identify how shareholders voted be kept
confidential, except when disclosure is mandated by law, such disclosure is
expressly requested by a shareholder or during a contested election for the
board of directors, and that the tabulators and the inspectors of election
be independent and not the employees of the Company."
SUPPORTING STATEMENT OF THE PROPONENT
"The confidential ballot is fundamental to the American political system. The
reason for this protection is to ensure that voters are not subjected to actual
or perceived coercive pressure. We believe that it is time that this
fundamental principle of the confidential ballot be applied to public
corporations.
"Many excellent companies use confidential voting. None have reported any
difficulty reaching quorums or meeting supermajority vote requirements and
those surveyed reported that the added cost of implementing confidentiality was
negligible.
"Strong support was shown at the last annual meeting when 36.8% of the votes
(excluding abstentions) were cast in favor of this proposal.
"It is our belief that shareholders need the protection of a confidential
ballot no less than voters in political elections. While we make no imputation
that our company's management has acted coercively, the existence of this
possibility is sufficient to justify confidentiality.
"This resolution would permit shareholders to voluntarily disclose their vote
to management by expressly requesting such disclosure on their proxy cards.
Additionally, shareholders may disclose their vote to any other person they
choose. This resolution would merely restrict the ability of the Company to
have access to the vote of its shareholders without their specific consent.
"Many shareholders believe confidentiality of ownership is ensured when
shares are held in street or nominee name. This is not always the case.
Management has various means of determining actual (beneficial) ownership. For
instance, proxy solicitors have elaborate databases that can match account
numbers with the identity of some owners. Moreover, why should shareholders
have to transfer their shares to nominees in an attempt to maintain
confidentiality? In our opinion, this resolution is the only way to ensure a
secret ballot for all shareholders irrespective of how they choose to hold
their shares.
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"We believe that confidential voting is one of the most basic reforms needed
in the proxy voting system and that the system must be free of the possibility
of pressure and the appearance of retaliation.
"We hope that you would agree to vote FOR this proposal."
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board of Directors believes that approval of the stockholder resolution
would limit the Company's ability to communicate with its stockholders and
urges stockholders to vote against the resolution.
For more than twenty years the Company has used an independent tabulator and
inspector of election and has no plans to discontinue this practice. The
proponent's resolution would have no effect on the Company's practice in this
regard. However, the Company is opposed to a requirement that balloting be
confidential.
In recent years the SEC has amended its proxy rules to improve
communications between corporations and beneficial owners. Confidential voting
is inconsistent with open communications. In the interest of promoting an open
dialogue with its stockholders, the Company believes it should be able to
communicate with its stockholders as permitted under the proxy rules without
the impediments that confidential voting would impose. The proponent
acknowledges that the Company has not coerced its stockholders and that it
complies with current Federal and state proxy regulations in its
communications with stockholders.
The Company also believes that cutting off its access to voting results
would interfere with the vote gathering and tabulation process. The Company is
responsible for, among other things, soliciting votes to obtain a quorum,
pursuing proxies that are missing in the mails and helping to resolve voting
ambiguities. Currently, more than 95% of the Common Stock is held in the names
of nominees. The tabulating process has become increasingly cumbersome as
ownership has been layered through the use of depositories, nominees and
"street names." The addition of a further layer of secrecy would, in the
Company's view, only make the process more cumbersome and costly. To the
extent the Company cannot participate and clarify voting ambiguities, shares
may not be voted and stockholders may be disenfranchised.
In summary, the Company believes that confidential voting would impair
stockholder communications and would not serve any useful purpose.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE
STOCKHOLDER RESOLUTION (ITEM NO. 5).
STOCKHOLDER PROPOSAL RELATING TO AIRFARE DISCOUNTS (ITEM NO. 6)
Mr. Franz Wenger, Punta Gorda, Florida, who owns 400 shares of the Common
Stock, has advised the Company of his intention to introduce the following
resolution of the annual meeting. To be adopted, this resolution, which is
opposed by the Board of Directors, would require the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock,
Series A Preferred Stock, Series F Preferred Stock and Series T Preferred
Stock, voting as a single class, present in person or represented by proxy and
entitled to vote at the annual meeting.
"RESOLVED: The shareholders of the Company request the Board of Directors
to implement a policy requiring USAir to issue upon request to (qualified
stockholders) an identification card which entitles them to travel on USAir
at discounts matching those of its most privileged employees and/or
directors. A "qualified stockowner" is a stockholder who must have owned at
least 200 shares of Common Stock for a period of 2 years.
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SUPPORTING STATEMENT OF THE PROPONENT
"Over the past several years, the owners of USAir have seen the value of
their Company and of their investment drop dramatically. This decline in value
has particularly hurt long term shareholders who had faith in USAir management
and trusted management forcasts and predictions.
"In sharp contrast with losses suffered by longterm shareholders, employees
and in particular management personnel and executives have done rather well,
with the latter group enjoying elaborate perks and excessive compensation.
"Under these circumstances, it is only fair that the owners of the Company
demand the same travel privileges on USAir as those enjoyed by their employees.
"Institution of a program of travel privileges for shareholders and issuing
of appropriate IDs is a small administrative effort due to the existing data
base and because the number of shareholders is relatively small (less than half
the number of employees). The number of qualified shareholders is still smaller
and with the qualifier (200 shares-2 years holding) purchase of shares merely
to obtain travel privileges will be precluded.
"If you agree with my proposal, mark your proxy for my resolution."
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company believes that approval of the stockholder resolution would be
financially detrimental to the Company and urges stockholders to vote against
the resolution.
The domestic airline industry, including the Company, has sustained
substantial losses in recent years. Discounted airfares, which have prevailed
in the industry, have played a significant role in contributing to those
losses. USAir closely monitors its pricing policies to ensure that it is
competitive and decides to offer discounted fares only after consideration of
many factors, including the projected effect of the discounts on the financial
position of the Company, the anticipated response of consumers, competitors and
related markets and USAir's overall marketing strategy. The Company does not
believe that the dilutive effect on yield (or revenue per revenue passenger
mile) resulting from the proposed airfare discounts would be in the best
interests of the Company and its stockholders generally.
Moreover, contrary to the proponent's statements, the Company believes that
implementation of the proposal would involve substantial administrative costs
and burdens. With respect to recordholders of shares of the Common Stock, the
Company believes the proposal would require it or its transfer agent to
construct a separate database of "qualified stockowners." With respect to
persons who hold their shares of Common Stock in "street name" or through a
nominee, determination of whether a beneficial holder is a "qualified
stockowner" would be difficult and costly. In addition, if certain "qualified
stockowners" who were beneficial holders wanted to preserve their anonymity, it
might be necessary for the Company to issue "bearer" identification cards to
those persons. A market in these cards could develop with the result that
"qualified stockowners" would not necessarily be the beneficiaries of the
discounts. In cases where the "qualified stockholder" is an institutional
holder, the Company would need to establish policies to determine which
individuals would be entitled to the discounts. In any event, the Company would
want to develop identification cards that were of a design and material that
would be difficult to counterfeit. In a time of tight budgetary constraints,
the Company believes that it can ill-afford to implement the bureaucracy that
would be necessary to administer the rules and procedures that would be
applicable to a stockholder airfare discount program.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 6)
26
<PAGE>
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which may come before the meeting
except that indicated above. However, if other business is brought before the
meeting, the persons acting under the enclosed form of proxy may vote
thereunder in accordance with their best judgment.
COST AND METHOD OF PROXY SOLICITATION
Proxies will be solicited by mail. The expense of such solicitation will be
borne by the Company. Directors, officers, or regular employees of the Company
and USAir may solicit proxies by telephone or in person. The cost of such
solicitation will be nominal. In addition, D.F. King & Co., Inc. has been
retained by the Company to assist in soliciting proxies from brokerage firms,
bank nominees and other institutional holders to assure a timely vote by the
beneficial owners of stock held of record by such firms, banks and
institutions. This firm will receive a fee not to exceed $17,500 for its
services.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 1995 annual meeting of stockholders, must be
received at the Company's principal executive offices by February 16, 1995.
INCORPORATION OF DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 all subsequent Quarterly
Reports on Form 10-Q filed before the date of the meeting and Appendices I
through IX to the Company's Proxy Statement dated April 26, 1993.
Any statement contained in a document incorporated by reference in this Proxy
Statement will be deemed to be modified or superseded for purposes of this
Proxy Statement to the extent that a statement contained in this Proxy
Statement or in any other subsequently filed document which is also
incorporated by reference in this Proxy Statement modifies or supersedes such
statement. Any statements so modified or superseded will not be deemed, except
as modified or superseded, to constitute a part of this Proxy Statement.
The Company will provide, without charge, to each person to whom this Proxy
Statement is delivered, upon written or oral request of such person, by first
class mail or other equally prompt means, within one business day of receipt of
such request, a copy of any and all the information that has been incorporated
by reference in the Proxy Statement (not including the exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference to the information that the Proxy
Statement incorporates). Written requests should be addressed to the Manager--
Investor Relations of USAir Group, Inc., USAir Group, Inc., 2345 Crystal Drive,
Arlington, Virginia 22227. Oral request may be made by telephone to the
following number: (703) 418-5305.
By Order of the Board of Directors,
James T. Lloyd
Secretary
June 15, 1994
27
<PAGE>
PROXY 1994
USAIR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock, Series A Cumulative Convertible
Preferred Stock, Series F Cumulative Convertible Senior Preferred Stock or
Series T Cumulative Convertible Exchangeable Senior Preferred Stock of USAir
Group, Inc. hereby appoints SETH E. SCHOFIELD, JAMES T. LLOYD and FRANK L.
SALIZZONI, or each of them, each with power of substitution, as proxies of the
undersigned to attend the annual meeting of stockholders of said corporation to
be held on July 27, 1994 at Arlington, Virginia, or any adjournment or
adjournments thereof, to vote upon the proposals described in the proxy
statement furnished herewith, and upon the transaction of such other business
as may properly come before the meeting, hereby revoking all proxies heretofore
given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR PROPOSALS
1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6 AS SET FORTH ON THE REVERSE SIDE.
(CONTINUED AND TO BE SIGNED, DATED AND VOTED ON REVERSE)
<PAGE>
Please mark
your votes
as this
[X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
Item 1--Election of 16 nominees for director: Messrs. Buffett, Colodny,
DeVito, Goodman, Harris, Horrigan, LeBuhn, Marshall, Maynard, Medlin, Munger,
Salizzoni, Schofield, Smith, Stevens and Mrs. Merriman
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT PERSON'S NAME ABOVE.)
For Withhold
[ ] [ ]
Item 2--Ratification of independent auditors.
For Against Abstain
[ ] [ ] [ ]
Item 3--Reversion of certain shares of Common Stock reserved under certain em-
ployee benefit plans to the status of unreserved shares.
For Against Abstain
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 4, 5 AND 6
Item 4--Consideration of the stockholder resolution regarding Director term
limitation.
For Against Abstain
[ ] [ ] [ ]
Item 5--Consideration of the stockholder resolution regarding confidential
voting.
For Against Abstain
[ ] [ ] [ ]
Item 6--Consideration of the stockholder resolution regarding airfare
discounts.
For Against Abstain
[ ] [ ] [ ]
Signature(s) _______________________________ Date ___________________________
NOTE: Please sign, date and return this proxy promptly in the enclosed
envelope which requires no postage if mailed in the United States. Please sign
exactly as name appears. For joint account, each owner should sign.
<PAGE>
PROXY 1994
USAIR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VOTING INSTRUCTIONS TO TRUSTEE
USAir, Inc. Employee Trustee: State Street Bank and Trust Company
Stock Ownership Plan
As a participant in the USAir, Inc. Employee Stock Ownership Plan (the "ESOP"),
I hereby direct State Street Bank and Trust Company as Trustee to vote as
indicated herein, upon the proposals described in the proxy statement dated June
15, 1994, at the annual meeting of stockholders of USAir Group, Inc. to be held
on July 27, 1994, at Arlington, Virginia, or at any adjournment or adjournments
thereof. The Trustee shall exercise its discretion with regard to such other
business as may properly come before the meeting. This direction applies to the
shares allocated to my account in the ESOP as well as to a proportion of shares
in the ESOP which have not yet been allocated to Participants and any allocated
shares for which Participant directions have not been received. IF A PROPERLY
SIGNED AND DATED CARD IS RETURNED WITHOUT DIRECTIONS, THIS WILL BE CONSIDERED A
DIRECTION TO THE TRUSTEE TO VOTE FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS
4, 5 AND 6 AS SET FORTH ON THE REVERSE SIDE.
VOTING INSTRUCTIONS TO TRUSTEES
USAir, Inc. 401(k) Savings Plan Trustee: Fidelity Management Trust Company
USAir, Inc. Employee Savings Plan Trustee: Fidelity Management Trust Company
As a participant in the USAir, Inc. 401(k) Savings Plan (the "Savings Plan")
and/or the USAir, Inc. Employee Savings Plan (the "Employee Savings Plan") I
hereby direct Fidelity Management Trust Company as Trustee of the USAir Group
Common Stock Fund in the Savings Plan and the Employee Savings Plan to vote as
indicated herein upon the proposals described in the proxy statement dated June
15, 1994, at the annual meeting of stockholders of USAir Group, Inc. to be held
on July 27, 1994, at Arlington, Virginia, or at any adjournment or adjournments
thereof.
(CONTINUED AND TO BE SIGNED, DATED AND VOTED ON REVERSE)
<PAGE>
Please mark
your votes
as this
[X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
Item 1--Election of 16 nominees for director: Messrs. Buffett, Colodny,
DeVito, Goodman, Harris, Horrigan, LeBuhn, Marshall, Maynard, Medlin, Munger,
Salizzoni, Schofield, Smith, Stevens and Mrs. Merriman
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT PERSON'S NAME ABOVE.)
For Withhold
[ ] [ ]
Item 2--Ratification of independent auditors.
For Against Abstain
[ ] [ ] [ ]
Item 3--Reversion of certain shares of Common Stock reserved under certain em-
ployee benefit plans to the status of unreserved shares.
For Against Abstain
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 4, 5 AND 6
Item 4--Consideration of the stockholder resolution regarding Director term
limitation.
For Against Abstain
[ ] [ ] [ ]
Item 5--Consideration of the stockholder resolution regarding confidential
voting.
For Against Abstain
[ ] [ ] [ ]
Item 6--Consideration of the stockholder resolution regarding airfare
discounts.
For Against Abstain
[ ] [ ] [ ]
Signature(s) _______________________________ Date ___________________________
NOTE: Please sign, date and return this proxy promptly in the enclosed
envelope which requires no postage if mailed in the United States. Please sign
exactly as name appears. For joint account, each owner should sign.
