<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
USAIR
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
USAir Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 28, 1995
ARLINGTON, VIRGINIA
----------------
October 17, 1995
To the Stockholders of
USAir Group, Inc.
The 1995 annual meeting of stockholders of USAir Group, Inc. (the "Company")
will be held at the Marriott Crystal Forum, 1999 Jefferson Davis Highway,
Arlington, Virginia on November 28, 1995 at 9:30 a.m. local time, to consider
and act on the following matters:
1. The election of 15 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 1995 (Item No. 2).
3. Consideration of five stockholder proposals as described in the
accompanying Proxy Statement (Item Nos. 3, 4, 5, 6 and 7).
4. The transaction of such other business as may properly come before the
meeting.
Eligible stockholders of record at the close of business on October 5, 1995
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
NOVEMBER 28, 1995
----------------
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 November 28, 1995. 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 October 17, 1995.
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 October 5, 1995
(other than holders of the Series B Preferred Stock (as defined below)) are
entitled to vote at the meeting. On October 5, 1995 the Company had outstanding
62,472,112 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"). 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 515.295 votes, each share of Series T-1
Preferred Stock is entitled to 487.8049 votes and each share of Series T-2
Preferred Stock is entitled to 378.7879 votes. 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 Company does not believe that Foreign Ownership
Restrictions limit 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.
<PAGE>
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 LLP as
the Company's independent public accountants for 1995 (Item No. 2) and (ii) to
approve each of the stockholder proposals (Items Nos. 3, 4, 5, 6 and 7).
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, nominees for
director and executive officers of the Company as of August 31, 1995. 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).
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
OWNER SHARES(1) CLASS(2)
----- --------- ----------
<S> <C> <C>
DIRECTORS AND NOMINEES FOR DIRECTOR
Robert W. Bogle.............................. 3,000
Warren E. Buffett............................ --(3) (3)
Edwin I. Colodny............................. 109,512(4)
Mathias J. DeVito............................ 700
George J. W. Goodman......................... 200 Depositary Shares(5)
John W. Harris............................... 1,000
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........................... 192,800(7)
Seth E. Schofield............................ 507,289(8)
74,400 Depositary Shares(9)
Raymond W. Smith............................. 500
Derek M. Stevens............................. --(6) (6)
EXECUTIVE OFFICERS
See listing under
Seth E. Schofield............................ "Directors" above
See listing under
Frank L. Salizzoni........................... "Directors" above
W. Thomas Lagow.............................. 158,211(10)
James T. Lloyd............................... 164,992(11)
John P. Frestel, Jr.......................... 115,000(12)
27 directors, nominees for director and execu-
tive officers of the Company as a group........ 1,730,280.5(13) 2.8%
</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 on August 31, 1995.
(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 40,000 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options.
(5) Mr. Goodman's holding of Depositary Shares is convertible into 498.5
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 177,800 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options and 3,000 shares of Common Stock subject to certain restrictions
upon disposition ("Restricted Stock").
(8) The listing of Mr. Schofield's holding includes 390,569 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options.
(9) Mr. Schofield's holding of Depositary Shares is convertible into 185,442
shares of Common Stock.
(10) The listing of Mr. Lagow's holding includes 153,211 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options.
(11) The listing of Mr. Lloyd's holding includes 163,992 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options.
(12) The listing of Mr. Frestel's holding includes 102,000 shares of Common
Stock issuable within 60 days of August 31, 1995 upon exercise of stock
options.
(13) The listing of all directors', nominees' and officers' holdings includes,
in the case of Depositary Shares, the number of shares of Common Stock
into which the Depositary Shares are convertible, and also includes
1,286,341 shares of Common Stock issuable within 60 days of August 31,
1995 upon exercise of stock options and 3,000 shares of Restricted Stock.
3
<PAGE>
The only persons known to the Company (from Company records and reports on
Schedules 13D and 13G filed with the Securities and Exchange Commission (the
"SEC")) which owned, as of August 31, 1995, 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)
-------------- ------------------- ----------------------- --------
<S> <C> <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 State Street Bank and 3,143,125(7) 5%
Trust Company, Trustee
225 Franklin Street
Boston, Massachussetts 02110
Common Stock Waddell & Reed Financial Services, Inc. 4,738,500(8) 7.6%
6300 Lamar Avenue
Shawnee Mission, Kansas 66201
Common Stock The Equitable Companies 5,707,925 9.1%
Incorporated
787 Seventh Avenue
New York, New York 10019
</TABLE>
- --------
(1) Represents percent of class of stock outstanding on August 31, 1995.
(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 10.2% 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 15,458,851 and 3,831,695 shares of Common
Stock, respectively. Together, the Series F Preferred Stock and Series T
Preferred Stock represent approximately 21.2% 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) Of these shares, 2,161,921 are held by such person under the USAir, Inc.
Employee Stock Ownership Plan (shared voting power and shared dispositive
power--2,161,921 shares), 981,166 are held by such person as trustee under
various collective investment funds for employee benefit plans and other
index accounts (sole voting power and sole dispositive power--981,166
shares) and 38 are held by such person as trustee/co-trustee under various
personal trust accounts (shared voting power and shared dispositive
power--38 shares).
(8) Waddell & Reed Investment Management Company has sole voting power and
sole dispositive power over 3,217,200 of these shares and Waddell & Reed
Asset Management Company has sole voting power and sole dispositive power
over 1,521,300 of these shares. Each of Waddell & Reed Investment
Management Company and Waddell & Reed Asset Management Company is an
indirect, wholly-owned subsidiary of Waddell & Reed Financial Services,
Inc.
(9) The Equitable Life Assurance Society of the United States has sole voting
power and sole dispositive power over 1,792,500 of these shares and
Alliance Capital Management L.P. has sole voting power and sole
dispositive power over 3,915,425 of these shares. Each of the Equitable
Life Assurance Society of the United States and Alliance Capital
Management L.P. is an indirect subsidiary of The Equitable Companies
Incorporated.
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. At
August 31, 1995, the Company's capital surplus was exhausted and therefore,
under Delaware law, the Company is subject to certain legal prohibitions on its
ability to repurchase or redeem its own shares of capital stock for cash or
other property. 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" and "--British Airways Investment Agreement" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
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 will be reduced to 15 immediately prior
to the 1995 annual meeting of stockholders, 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, except Mr. Bogle, is currently a
director of the Company and was elected in 1994 by the stockholders of the
Company. 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, currently directors of the Company, are not standing for re-
election.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Robert W. Bogle, 57. Mr. Bogle is President and Chief Executive Offi- --
cer of The Philadelphia Tribune, the nation's
oldest newspaper addressed to the African Ameri-
can community. He assumed his position in May
1989 and previously held other high-level posi-
tions at the newspaper. In June 1995, Mr. Bogle
completed his tenure as President of the Na-
tional Newspaper Publishers Association, a trade
association comprising the publishers of 205
Black-owned newspapers from across the nation.
Mr. Bogle is Chairman of the Council of Trustees
at Cheyney University, serves on the Executive
Committee of the Greater Philadelphia Chamber of
Commerce and is a board advisor to the United
Negro College Fund. He is also a member of the
Executive Committee of the Boy Scouts of Ameri-
ca, a member of the Union League of Philadel-
phia, and a life member of Kappa Alpha Psi fra-
ternity. Mr. Bogle is Vice Chairman of The Hos-
pitals and Higher Education Authority of Phila-
delphia and Vice Chairman of Amalgamated Pub-
lishers, Inc. He serves on the Board of Direc-
tors of The American Red Cross, Presbyterian
Medical Center of Philadelphia, the Police Ath-
letic League, the Christian Street YMCA, and The
American Heart Association. Mr. Bogle is also a
founding member of United Media of Philadelphia,
an organization comprised of media owned and op-
erated by African Americans.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Edwin I. Colodny, 69........ 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
Lockheed Martin 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.
Mathias J. DeVito, 65....... Mr. DeVito is Chairman of the Board of The Rouse 1981
Company (real estate development and manage-
ment). He also serves as a Director of First
Maryland Bancorp and subsidiaries of The Rouse
Company. He is a member of the Board of the
Business Committee for the Arts, Chairman of the
Board of Empower Baltimore Management Corpora-
tion and former Chairman of the Greater Balti-
more Committee. Mr. DeVito is Chairman of the
Compensation and Benefits Committee and a member
of the Finance and Planning and Safety Commit-
tees of the Board of Directors.
George J. W. Goodman, 65.... 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, 48.......... 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 Company
and Dominion Resources, Inc. Mr. Harris is for-
mer 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 orga-
nizations. He is Chairman of the Safety Commit-
tee and a member of the Audit and Compensation
and Benefits Committees of the Board of Direc-
tors.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Edward A. Horrigan, Jr., 66... Mr. Horrigan is the former Chairman of the Board 1987
of Directors of Liggett Group Inc. (consumer
products), a position he had held from May 1993
until his retirement in December 1994. 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.
Robert LeBuhn, 63............. Mr. LeBuhn was the Chairman of Investor Interna- 1966
tional (U.S.), Inc. (investments) until his re-
tirement in January 1995. He is now a private
investor and is a Director
of Acceptance Insurance Companies, Lomas Finan-
cial Corp., Cambrex Corporation and Enzon, Inc.
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, 61........ 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 British Tele-
communications Plc, HSBC Holdings Plc, and
Qantas Airways Limited. He is also a member of
the Board of Directors of the New York Stock Ex-
change. Sir Colin is a member of the Finance and
Planning Committee of the Board of Directors.
Roger P. Maynard, 52.......... 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. He is a member of the
Nominating, Compensation and Benefits and Safety
Committees of the Board of Directors.
John G. Medlin, Jr., 61....... 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 Corporation, Burlington Industries,
Inc., Media General, Inc., National Services In-
dustries, Inc., RJR Nabisco Holdings Corp. and
Nabisco Holdings Corp. He is Chairman of the
Nominating Committee and a member of the Compen-
sation and Benefits Committee of the Board of
Directors.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Hanne M. Merriman, 53..... 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, Ann Taylor
Stores Corporation and T. Rowe Price Mutual Funds.
She is a member of the National Women's Forum and a
Trustee of The American-Scandinavian Foundation.
She was a member of the Board of Directors of the
Federal Re-serve 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 Nominating and Safety Committees of
the Board of Directors.
Frank L. Salizzoni, 57.... 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. He is a member
of the board of directors of Georgetown Univer-
sity and serves as a member of Georgetown
University's Committee on Medical Center Af-
fairs.
Seth E. Schofield, 56..... Mr. Schofield is Chairman of the Board of Direc- 1989
tors and Chief Executive Officer of the Company
and USAir. As discussed below, Mr. Schofield
will retire from those positions and as a direc-
tor of the Company and USAir once a successor is
elected and assumes the duties of Chairman of
the Board of Directors and Chief Executive Offi-
cer of the Company and USAir. Mr. Schofield was
elected Chairman of the Board of Directors of
the Company and USAir in June 1992. In June 1991
he was elected President and Chief Executive Of-
ficer of the Company and of
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
USAir. In June 1990 he was elected President and
Chief Operating Officer of USAir. He had served
as Executive Vice President--Operations of USAir
since 1981. Mr. Schofield joined USAir in 1957
and has held various corporate staff positions.
Mr. Schofield is a Director of the Erie Insur-
ance 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 America. Mr. Scho-
field is Chairman of the Board of Directors of
the Greater Pittsburgh Chamber of Commerce, and
a Board Member of the Pennsylvania Business
Roundtable, Penn's Southwest Association, the
Virginia Business Council and a member of the
Desai Capital Management Advisory Board. He is
also a member of the Allegheny Conference on
Community Development, the Federal City Council
and serves on the Board of Trustee of the Uni-
versity of Pittsburgh and Westminster College.
Raymond W. Smith, 58.... 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, 56.... 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). He is a Director of
Commercial Union Assurance Plc. 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
1994 and has also provided such services during 1995.
- --------
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held eleven meetings in 1994. The Board
of Directors has established the following committees: Finance and Planning
Committee, Compensation and Benefits Committee ("Compensation Committee"),
Audit Committee, Nominating Committee and Safety Committee.
10
<PAGE>
During 1994, the Finance and Planning Committee held four meetings, the
Compensation Committee held six meetings, the Audit Committee held six meetings
and the Nominating Committee held one meeting. The Safety Committee became a
standing committee in 1995.
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 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 1994, each of the incumbent directors attended 75 percent or more of
the meetings of the Board of Directors and of the committees on which the
director served.
COMPENSATION OF DIRECTORS
In 1994, each incumbent director, except Messrs. Schofield and Salizzoni, was
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. For the period from
January 1, 1995 through September 1995, the retainer fee was reduced to $14,000
per year. It has been restored to $18,000 per year. Mr. LeBuhn, Chairman of the
Finance and Planning Committee, Mr. DeVito, Chairman of the Compensation
Committee, Mrs. Merriman, Chairman of the Audit Committee, Mr. Medlin, Chairman
of the Nominating Committee, and Mr. Harris, Chairman of the Safety Committee,
each receives an additional fee of $2,000 per year for serving in those
respective capacities. Each of Messrs. Schofield and Salizzoni 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
11
<PAGE>
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.
EXECUTIVE OFFICERS
Information about the executive officers of the Company and USAir was
provided in the combined Annual Report of the Company and USAir on Form 10-K
for the year ended December 31, 1994. Since the filing of that report, in
September 1995 Seth E. Schofield, the Chairman of the Board of Directors and
Chief Executive Officer of the Company and USAir, announced that he will retire
from those positions once a successor is elected and assumes the duties of
those positions. The Boards of Directors of the Company and USAir have formed a
special committee of non-management directors to conduct a search for Mr.
Schofield's successor. Mr. DeVito is the chairman of the special committee.
Also since the filing of the Form 10-K report, Robert C. Oaks has been
elected Senior Vice President-Operations of USAir, as of July 31, 1995. Robert
Oaks, 59 years old, joined USAir in December 1994 as its Vice President-
Corporate Safety and Regulatory Compliance. He is a retired United States Air
Force general. His last post in his 35-year career with the Air Force was as
commander of U.S. Air Forces in Europe. Prior to that post, he was commander of
the Air Training Command, the service's organization responsible for all
initial training, including flight training.
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). As discussed above, Mr. Schofield will retire from his
positions as Chairman and Chief Executive Officer of the Company and USAir once
a successor is elected and assumes the duties of those positions.
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(F) OPTIONS COMPENSATION(H)
------------------ ---- ----------- -------- ------------ ---------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Seth E. Schofield....... 1994 $500,000 $ 0 $116,136(E) -- -- $ 74,821
Chairman and Chief 1993 $475,635(C) $ 0 $275,601(E) -- -- $ 64,302
Executive Officer of 1992 $412,981(C) $ 0 $174,792(E) -- 5,569 $ 38,495
the Company and of
USAir
Frank L. Salizzoni(A)... 1994 $385,769 $ 0 $ 11,020(E) -- 100,000(G) $167,160(I)
President and Chief 1993 $317,558(C) $ 0 $ 45,374(E) -- -- $ 52,222
Operating Officer of 1992 $231,249(C) $ 0 $ 26,892(E) -- 2,800 $ 34,382
the Company and of
USAir
W. Thomas Lagow(B)...... 1994 $325,000 $ 0 -- -- -- $286,225(J)
Executive Vice 1993 $310,058(C) $ 0 -- -- -- $282,521(K)
President--Marketing of 1992 $234,258(C) $125,000(D) -- -- 153,211 $ 17,617(L)
USAir
James T. Lloyd.......... 1994 $275,000 $ 0 $ 18,705(E) -- -- $ 40,424
Executive Vice 1993 $257,365(C) $ 0 $ 73,215(E) -- -- $ 36,188
President, General 1992 $211,058(C) $ 0 $ 47,974(E) -- 2,492 $ 21,382
Counsel and Secretary
of the Company;
Executive Vice
President and General
Counsel of USAir
John P. Frestel, Jr..... 1994 $275,000 $ 0 $ 30,682(E) -- -- $ 45,866
Senior Vice President-- 1993 $248,750(C) $ 0 $ 48,805(E) -- -- $ 37,363
Human Resources of 1992 $178,750(C) $ 0 $ 31,717(E) -- 2,000 $ 19,821
USAir
</TABLE>
12
<PAGE>
- --------
(A) Mr. Salizzoni was named President and Chief Operating Officer of the
Company and USAir effective April 1, 1994.
(B) Mr. Lagow's employment with USAir commenced on February 7, 1992.
(C) Amounts disclosed reflect reductions in salary during (i) 1993 of $24,365,
$12,250, $14,942, $10,904 and $8,750, and (ii) 1992 of $87,019, $43,750,
$49,272, $38,942 and $31,250 for Messrs. Schofield, Salizzoni, Lagow,
Lloyd and Frestel, 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.
(D) Paid to Mr. Lagow in the form of a "sign-on bonus."
(E) Amounts disclosed include for (i) 1994, $108,633, $10,391, $18,705, and
$30,518, (ii) 1993, $271,288, $33,259, $73,215, and $48,805 and (iii)
1992, $171,410, $22,523, $47,974 and $31,717, received by Messrs.
Schofield, Salizzoni, Lloyd and Frestel, respectively, to cover
incremental tax liability resulting from income derived from the lapsing
of restrictions on the disposition of Restricted Stock. Restricted Stock
is Common Stock. subject to certain restrictions on disposition. 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.
(F) At December 31, 1994, Messrs. Schofield, Salizzoni, Lloyd and Frestel
owned 10,000, 3,000, 1,000 and 1,000 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 $42,500, $12,750, $4,250
and $4,250, respectively. Restricted Stock is eligible to receive
dividends; however, the Company has not paid dividends on its Common Stock
since the second quarter of 1990.
(G) Non-qualified stock option grant on April 1, 1994, the date Mr. Salizzoni
was named President and Chief Operating Officer of the Company and USAir.
(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, 1993 and 1994, 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 and 1994, the dollar
value of premiums paid by USAir with respect to term life insurance):
1994--Mr. Schofield--$31,194; Mr. Salizzoni--$27,722; Mr. Lagow--$10,225;
Mr. Lloyd--$18,424 and Mr. Frestel--$21,188; 1993--Mr. Schofield--$29,328,
Mr. Salizzoni--$26,010, Mr. Lagow--$9,716, Mr. Lloyd--$17,291 and Mr.
Frestel--$18,661; 1992--Mr. Schofield--$38,495; Mr. Salizzoni--$34,382;
Mr. Lagow--$12,902; Mr. Lloyd--$21,382 and Mr. Frestel--$19,821. During
1994 and 1993, USAir made contributions to the accounts of Messrs.
Schofield, Salizzoni, Lagow, Lloyd and Frestel in certain defined
contribution pension plans in the following amounts: 1994--$43,627,
$38,192, $26,000, $22,000 and $24,678, respectively, and 1993--$34,974,
$26,212, $22,805, $18,897 and $18,702, respectively.
(I) Amount disclosed also reflects $101,246 for reimbursement of relocation
expenses.
(J) 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 second installment,
$250,000, of the total payment.
(K) Amount disclosed includes the first installment, $250,000, of the total
payment referred to in footnote (J).
(L) Amount disclosed also reflects $4,715 for reimbursement of relocation
expenses.
USAir will enter into an agreement with Mr. Schofield pursuant to which Mr.
Schofield will provide consulting services to the Company and USAir for a
period of six months immediately following his retirement, for which period
Mr. Schofield will be paid at his current salary rate.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal year
1994 to the named executive officers. No option grants were made to Messrs.
Schofield, Lagow, Lloyd or Frestel.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
-------------------------------------------------------------------- -----------------------------
PERCENT OF
TOTAL
OPTIONS/SARS
GRANTED TO
OPTIONS/ EMPLOYEES EXERCISE
SARS IN FISCAL OR BASE EXPIRATION
NAME GRANTED YEAR(B) PRICE(C) DATE 0% 5% 10%
---- ---------- ------------ -------- ----------- --- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank L. Salizzoni...... 100,000(a) 31% $7.75 May 1, 2004 $ 0 $ 492,536 $ 1,251,180
All common
stockholders(d)........ $277,755,531 $728,452,620
</TABLE>
- --------
(a) These options were granted as of April 1, 1994. Twenty-five percent of
these options vested on the first anniversary of their grant (April 1,
1995), an additional 25% will vest on the second anniversary of their
grant (April 1, 1996), and the remaining 50% will vest on the third
anniversary of their grant (April 1, 1997). None of these options is
accompanied by stock appreciation rights.
(b) Based on total grants of options to purchase 321,000 shares of Common
Stock awarded during 1994.
(c) The exercise price and tax withholding obligation related to exercise may
be paid by delivery of previously-owned shares or by offset of the
underlying shares, subject to certain conditions.
(d) Represents the increase in aggregate market value of all shares of Common
Stock outstanding as of April 1, 1994, from that date to May 1, 2004 at
the assumed rate of stock price appreciation specified.
13
<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 1994. None of the officers
exercised any options during 1994 and none of the unexercised options held by
these officers was in-the-money based on the fair market value of the Common
Stock on December 31, 1994 ($4.25).
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS/SARS
AT FISCAL YEAR-END
-------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Seth E. Schofield.................................... 395,069 0
Frank L. Salizzoni................................... 152,800 100,000
W. Thomas Lagow...................................... 63,211 90,000
James T. Lloyd....................................... 169,742 0
John P. Frestel, Jr. ................................ 102,000 0
</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 during the last ten calendar
years of service. 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 1994, 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
Plan, but which, under the Code, are not permitted to be funded or paid through
the qualified plans
14
<PAGE>
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 Frestel 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................. $ 19,684 $ 29,525 $ 39,367 $ 49,209 $ 54,209 $ 54,209
200,000................. 43,684 65,525 87,367 109,209 119,209 119,209
300,000................. 67,684 101,525 135,367 169,209 184,209 184,209
400,000................. 91,684 137,525 183,367 229,209 249,209 249,209
500,000................. 115,684 173,525 231,367 289,209 314,209 314,209
600,000................. 139,684 209,525 279,367 349,209 379,209 379,209
700,000................. 163,684 245,525 327,367 409,209 444,209 444,209
800,000................. 187,684 281,525 375,367 469,209 509,209 509,209
</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 compensation covered by the Retirement Plan is salary and bonus,
as reported in the Summary Compensation Table. 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. Salizzoni--1
year, Mr. Lagow--none, Mr. Lloyd--5 years and Mr. Frestel--3 years.
USAir has entered into agreements with Messrs. Lagow, Salizzoni, Lloyd and
Frestel 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.
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 $9,240 in 1994. 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 1994. Pre-tax
compensation is defined for purposes of the Retirement Savings Plan as base pay
plus bonus, plus an employee's tax deferred contributions under such Plan up to
a maximum of $150,000 in 1994. USAir also established a non-qualified
supplemental defined contribution plan (the "Supplemental Savings
15
<PAGE>
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 1994 to Messrs. Schofield, Salizzoni,
Lagow, Lloyd and Frestel 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 1994,
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, Salizzoni, Lagow, Lloyd and Frestel 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. 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 extensions on each anniversary date (to
the fourth anniversary of such
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<PAGE>
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 a lump sum 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. If an agreement or agreement in principle
relating to a change of control were reached prior to Mr. Schofield's
retirement and a suitable replacement were elected and assumed his duties, Mr.
Schofield would be entitled to receive the benefits described in the
immediately preceding sentence. 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
17
<PAGE>
in the event of a termination shall be increased, if necessary, such that,
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, the 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, 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. 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 August 31, 1995, there were unexercised stock options to
purchase 391,595 shares of Common Stock (of which 48,600 had tandem stock
appreciation rights) under the 1984 Plan and unexercised stock options to
purchase 3,119,250 shares of Common Stock (none of which had tandem stock
appreciation rights) under the 1988 Plan. (As of August 31, 1995, 2,849,925 of
the 3,119,250 options outstanding under the 1988 Plan and 280,895 of the
391,595 options outstanding under the 1984 Plan were exercisable pursuant to
their normal vesting schedule.) As of August 31, 1995, the weighted average
exercise price of all the outstanding stock options was approximately $21.22.
On August 31, 1995, the closing price of a share of Common Stock on the New
York Stock Exchange was $8.125. 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 August 31, 1995, 3,000 shares of Restricted Stock previously granted to
Mr. Salizzoni 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 Mr. Salizzoni.
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, an installment being
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due and payable on each of 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 AND BENEFITS COMMITTEE OF THE BOARD OF DIRECTORS
The policies of the Compensation and Benefits Committee of the Board of
Directors (the "Compensation Committee") with respect to compensation of the
Company's executive officers are to:
. 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; and
. 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 package for executive officers of the Company is comprised
of three elements--base salary, annual cash incentive compensation, and long-
term incentive compensation. The Compensation Committee plays an active role
in the oversight and review of all compensation paid to executive officers of
the Company. 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 of the Company's executive officers,
including the Chairman and Chief Executive Officer and the four other officers
named in the Summary Compensation Table. This review did not occur during the
last fiscal year. Because of the Company's continued financial losses, no
salary increases were contemplated for executive officers in 1994 and hence a
competitive salary review was deemed unnecessary. In past years when a salary
review was undertaken, the Compensation Committee reviewed the market rate for
peer-level positions of the other major domestic passenger airlines,
including, but not limited to, Delta Air Lines, Inc. ("Delta"), United Air
Lines ("United") and American Airlines ("American"). Delta, United and
American (or their parent companies) are included in the S&P Airline Index,
which has been used in prior years' Performance Graphs. Based primarily on
this comparison, the Compensation Committee established the base salary for
the Chief Executive Officer and other executive officers.
While the Compensation Committee reviews the salaries of the other major
airlines to establish a market rate, the Committee does not necessarily
"target" any specific range, such as the lower end, median or upper end of the
comparison range, when setting the Chief Executive Officer's base salary. As
discussed below, in 1992, after an independent compensation consultant
conducted a study of comparable airline officers' salaries, the Compensation
Committee recommended an increase in the Chief Executive Officer's base salary
to the median level of the comparison range reflected in the study, but Mr.
Schofield declined to accept an increase. According to publicly available
information, the current base salary of the Company's Chief Executive Officer
is lower than the base salaries for the chief executive officers of Delta,
United, American and Southwest Airlines, Inc. Mr. Schofield does not
participate in Compensation Committee or Board of Directors deliberations or
decision-making regarding any aspect of his compensation. As discussed above,
Mr. Schofield
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<PAGE>
will retire from his positions as Chairman and Chief Executive Officer of the
Company and USAir once a successor is elected to and assumes the duties of
those positions.
Each of the executive officers named in the Summary Compensation Table has an
employment agreement with the Company which guarantees a certain level of base
salary. Each executive officer's employment agreement provides that he will
receive base salary at least equal to the highest base salary paid during the
preceding twelve-month period. In the event that the Company violates this
provision of the agreement, the officer may terminate his employment for "good
reason" under the agreement and receive a payout of compensation and benefits
for the remainder of the four-year employment period protected by the
agreement.
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 reported by the Compensation Committee in prior reports, the
Compensation Committee had reduced the salaries of the executive and other
officers for a fifteen-month period commencing on January 1, 1992 and ending on
March 29, 1993. This salary reduction was part of a comprehensive Company-wide
salary reduction program. Each of the executive officers of the Company agreed
to the reductions in salary, waiving the base salary guarantees in their
employment agreements, where applicable.
Historically, the Compensation Committee has awarded merit increases based on
measuring individual performance against objectives. However, due to the
Company's poor financial performance since 1989, the Compensation Committee had
not awarded merit increases in executive officer base salaries since 1989. From
1989 to 1993, salaries were increased only as a result of a promotion or an
increase in responsibilities.
In 1992, after the commencement of the salary reduction program, the Company
commissioned an independent compensation consultant to conduct a comprehensive
study of the salaries of comparable airline officers. The study disclosed that
the base salaries of the Company's executive officers (prior to reduction under
the salary reduction program) were substantially below those salaries for
analogous positions at major competitors. After reviewing the results of the
study and considering its desire to motivate and retain the Company's key
executive officers, and the officers' individual performance and experience,
the Compensation Committee established new base salaries for executive officers
(other than the Chief Executive Officer) at the conclusion of the salary
reduction period in 1993, targeting the median of the comparative range
reflected in the study. Based on the salary review, the Compensation Committee
proposed a new base salary for the Chief Executive Officer of $590,000.
However, because of the Company's poor financial performance, Mr. Schofield
declined to accept an increase in base salary and his salary was restored to
its pre-reduction level of $500,000. The new base salaries for the other four
executive officers named in the Summary Compensation Table became effective in
April 1993. As stated above, as a result of the Company's continuing financial
losses, no salary increases were considered by the Compensation Committee
during 1994. Except as set forth below, the base salaries established by the
Compensation Committee in 1993 remained effective throughout 1994 and remain in
effect today.
On April 1, 1994, Mr. Salizzoni was promoted from Executive Vice President-
Finance to the position of President and Chief Operating Officer. At the time
of his promotion, the Compensation Committee approved an increase in his base
salary commensurate with his increased responsibilities.
In March 1994, the Company commenced negotiations with its labor unions in an
effort to reduce annual personnel costs by $500 million through concession
agreements involving wage and benefit reductions, improved productivity and
other cost savings. In 1994, in light of the union negotiations, Messrs.
Schofield and Salizzoni requested a reduction in their base salaries as a
demonstration of leadership. In November 1994,
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<PAGE>
the Compensation Committee approved a reduction in the base salaries of the
Chief Executive Officer and the President and Chief Operating Officer.
Effective in December 1994, their base salaries were reduced in accordance with
the following schedule:
. 10% of the amount of salary between $5,000 and $20,000;
. 15% of the amount of salary between $20,000 and $50,000;
. 20% of the amount of salary between $50,000 and $100,000; and
. 25% of the amount of salary between $100,000.
Both executive officers signed waivers of the applicable provisions of their
employment agreements guaranteeing a higher level of base salary. As described
in the Company's Form 10-Q Quarterly Report for the period ended June 30, 1995,
in late July the Company announced that it was ending discussions with USAir's
unions on a wage concession and restructuring package due to an impasse on key
economic and efficiency issues and that it will concentrate on reducing its
labor costs through traditional collective bargaining. After the discussions
with the unions ended, Messrs. Schofield's and Salizzoni's salaries were
restored to their prior levels.
Annual Cash Incentive Compensation. 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 the
executive officers, of the Company are eligible to participate in the plan.
The Compensation Committee is authorized to grant awards under this plan only
if the Company achieves a two percent or greater return on sales ("ROS") for a
fiscal year. The target level of performance is four percent ROS. The maximum
level of performance recognized under the plan is a six percent ROS.
Additionally, for each officer of the Company, the Compensation Committee has
previously set an incentive compensation target percentage and a maximum
percentage. If the Company achieves the target performance of four percent ROS,
the full target percentage set by the Committee for the individual officer is
applied to the individual's base salary for the year to determine the cash
bonus award (the "Target Award") for the individual. Target Awards for
executive officers range from 30% to 50% of base salary.
The Compensation Committee is authorized to approve awards under the plan for
performance which is less than or greater than the target performance of four
percent ROS. If the Company achieves the minimum performance level of two
percent ROS, the executive would be paid only half of the Target Award. For
performance levels greater than two percent ROS but less than four percent ROS,
a proportionate percentage of the Target Award would be paid. In the event that
the Company's performance level exceeds the target performance of four percent
ROS, the Company would pay amounts greater than the Target Award. If the
Company achieves the maximum target performance of six percent ROS, the
executive would receive the maximum percentage which is twice the Target Award.
The maximum awards for executive officers, set by the Compensation Committee
pursuant to the plan, range from 60% to 100% of base salary. For performance
levels greater than four percent ROS but less than six percent ROS, a
proportionate percentage of the Target Award would be paid. The plan also
provides that the Compensation Committee may adjust awards to executive
officers based on individual performance; however, in no event may the award
exceed 250% of the Target Award for such individual. The Compensation Committee
has never made any such adjustments.
The Compensation Committee last approved payments to executive officers under
this plan for the fiscal year ended December 31, 1988. The Company has failed
to achieve the minimum two percent ROS
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performance level in any fiscal year since 1988 and, therefore, the
Compensation Committee has not made any awards under the plan since then. The
Compensation Committee will continue to review the effectiveness of the plan
and, if the Compensation Committee deems appropriate, could recommend changes
to the plan in the future.
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 the 1988 Stock Incentive Plan (the "1988 Plan"). Both the 1984 Plan
and the 1988 Plan are 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 effective date of the grant.
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 its executive officers, it has not promulgated any
standards regarding levels of ownership by executive officers.
During 1994, the only executive officers to be granted options were newly
hired executive officers and executive officers who received promotions. As
stated above, on April 1, 1994, Mr. Salizzoni was promoted to the position of
President and Chief Operating Officer. At the time of his promotion, the
Compensation Committee awarded Mr. Salizzoni the option to purchase 100,000
shares of Common Stock, under the terms of the 1988 Plan. The stock option
awards made in 1994 were non-qualified options and were subject to a vesting
schedule under which 25% of the options vested on the first anniversary of the
award, 25% of the options will vest on the second anniversary of the award, and
the remaining 50% of the options will vest on the third anniversary of the
award.
In connection with the company-wide salary reduction program in 1992 and
1993, the Company established the 1992 Stock Option Plan (the "1992 Plan"). The
1992 Plan is also administered by the Compensation Committee. Under the 1992
Plan, the Compensation Committee granted every employee of the Company who
participated in the salary reduction program non-qualified options to purchase
50 shares of Common Stock at $15 per share for each $1,000 of salary foregone
during the reduction period. The Compensation Committee granted executive
officers options under the 1992 Plan in accordance with the same formula
applicable to all other employees of the Company.
Restricted Stock. Under the terms of the 1988 Plan, the Compensation
Committee is authorized to grant awards of Restricted Stock. 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. These awards
were all subject to a five year vesting schedule, with restrictions lapsing on
a percentage of the award on each anniversary of the award. No awards of
Restricted Stock have been granted by the Compensation Committee since 1990.
During 1994, the restrictions expired on a total of 20,000 shares of
Restricted Stock held by the Chief Executive Officer, which shares were
originally granted in 1989 and 1990. Restrictions also expired during 1994 on a
total of 10,000 shares of Restricted Stock held by Messrs. Salizzoni, Lloyd and
Frestel, which shares were originally granted in 1989 and 1990.
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<PAGE>
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. In December 1994, the Securities and Exchange Commission issued
amendments to the proposed regulations under Section 162(m). The Compensation
Committee is studying Section 162(m) and the proposed regulations 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 executive compensation
and benefits matters presented to it and will act based on the best information
available in the best interests of the Company, its shareholders and employees.
Mathias J. DeVito, Chairman
George J. W. Goodman
John W. Harris
Roger P. Maynard
John G. Medlin, Jr.
Raymond W. Smith
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PERFORMANCE GRAPH
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
S&P PEER
Measurement Period USAIR S&P AIRLINE ISSUER
(Fiscal Year Covered) GROUP 500 INDEX INDEX INDEX
- --------------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Measurement Pt-12/30/1989 $100.00 $100.00 $100.00 $100.00
FYE 12/30/1990 $ 47.19 $ 93.44 $ 69.51 $ 76.21
FYE 12/30/1991 $ 36.33 $118.02 $ 89.01 $ 97.01
FYE 12/30/1992 $ 38.20 $123.29 $ 77.75 $ 91.41
FYE 12/30/1993 $ 38.58 $131.99 $ 84.78 $104.19
FYE 12/30/1994 $ 12.73 $129.96 $ 73.15 $ 75.63
</TABLE>
The above graph compares the performance of the Company's Common Stock during
the period January 1, 1990 to December 31, 1994 with the S&P 500 Index and a
peer issuer index (the "Peer Issuer Index"). It also depicts the S&P Airline
Index during the relevant time period, which was the index used in previous
performance graphs of the Company. The graph depicts the results of investing
$100 in the Company's Common Stock, the S&P 500 Index and the Peer Issuer
Index, as well as the S&P Airline Index, at closing prices on December 29,
1989. The stock price performance shown on the graph above is not necessarily
indicative of future price performance. The Peer Issuer Index consists of AMR
Corporation, Delta Air Lines, Inc., Southwest Airlines, Inc. and the Company.
The S&P Airline Index consists of AMR Corporation, Delta Air Lines, Inc., UAL
Corporation and the Company.
The Company has selected the Peer Issuer Index for use in the above and
future performance graphs in lieu of the S&P Airline Index because one of the
companies in the S&P Airline Index, UAL Corporation, underwent a complex
recapitalization in 1994 which makes it difficult to compare the return over
time on an initial investment in UAL Corporation to the return on similar
investments in the other corporations contained in that index. This is due in
part to the fact that holders of common stock of UAL Corporation prior to the
recapitalization received a combination of cash and various securities in
exchange for their common stock pursuant to the recapitalization. To determine
the December 31, 1994 value of the UAL Corporation component of the S&P Airline
Index, the Company used its good faith efforts to value at December 31, 1994
each element of the combination of cash and securities received by common
stockholders of UAL Corporation in 1994 as a result of the recapitalization.
The replacement index, the Peer Issuer Index, is identical to the S&P Airline
Index except for the deletion of UAL Corporation and the addition of Southwest
Airlines, Inc. The Company believes that the substitution of Southwest
Airlines, Inc. makes the Peer Issuer Index a more accurate benchmark against
which to compare the stock price performance of the Company over time.
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SELECTION OF AUDITORS (ITEM NO. 2)
The Board of Directors of the Company has named KPMG Peat Marwick LLP as
independent public accountants to examine the financial statements of the
Company for fiscal year 1995, subject to ratification and approval by the
stockholders. KPMG Peat Marwick LLP acted in the same capacity during 1994. 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 LLP's 1994 services will amount to approximately
$818,400, including $465,800 for the examination of financial statements and
issuance of reports in compliance with debt or other agreements relating to
annual audited financial statements and $352,600 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.
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL CONCERNING CONFIDENTIAL VOTING (ITEM NO. 3)
The New York City Police Pension Fund, One Centre Street, New York, New York
10007-2341, which owns 45,955 shares of 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 31.5% 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.
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"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.
"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 and 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, almost 90% 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. 3).
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STOCKHOLDER PROPOSAL RELATING TO COMPENSATION CONTINGENT ON A CHANGE OF CONTROL
(ITEM NO. 4)
Mr. William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, who owns
shares of Common Stock with a market value in excess of $1,000, has advised the
Company of his 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 Common Stock, Series A Preferred Stock, Series F
Preferred Stock and Series T Preferred Stock, voting as a single class, present
in person or by proxy at the annual meeting.
"RESOLVED, that the shareholders recommend that the board of directors
adopt a policy against entering into future agreements with officers and
directors of this corporation which provide compensation contingent on a
change of control of the corporation, unless such compensation agreements
are submitted to a vote of the shareholders and approved by a majority of
shares present and voting on the issue."
SUPPORTING STATEMENT OF THE PROPONENT
"Lucrative severance contracts awarded to senior corporate executives which
provide compensation contingent on a change of control, usually through a
merger or acquisition of the corporation, are known as "golden parachutes.'
These contracts are awarded without shareholder approval.
"The practice of providing these large cash awards to a small group of senior
corporate managers without shareholder approval has been a subject of public
outcry. In 1988, the U.S. Senate in emphasizing the potential conflict of
interest between management and shareholders created by these agreements voted
ninety-eight to one to require shareholder approval of golden parachutes which
exceed three times annual compensation.
"Although final action was not taken, it is clear to me that the overwhelming
vote in favor of the measure reflects public sentiment against golden
parachutes. A shareholder vote would allow the corporation's owners to decide
for themselves whether golden parachutes are in their best interests.
"As a founding member of the Investors Rights Association of America it is
clear to me that requiring a shareholder vote is necessary to address the
conflicts of interest between management and shareholders that arise in the
awarding of golden parachutes.
"I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION."
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company believes that contractual arrangements which provide reasonable
contingent compensation to key executives who are terminated following a change
of control form an important and entirely appropriate element of an executive
benefit program. This is especially true in light of the keen competition for
outstanding senior management personnel, developments in the field of
management compensation and the high level of takeover activity in past years.
Although the proposal does not relate to the Company's existing severance
arrangements, the Board of Directors believes that to adopt such a policy with
respect to future arrangements would impair the Company's ability to recruit
top executives, unless the Company were willing to make other employment
arrangements that might well be more costly to the Company.
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The Board of Directors believes that the Company's existing severance program
is in the mainstream of business practices today. The Board of Directors also
believes that severance agreements of this type are in the stockholders'
interests because the arrangements help ensure that key executives will not be
distracted by the personal uncertainties that arise during a threatened change
in control. The agreements, which have no current cost to the Company, are
designed to keep key executives' undivided attention on their duties, at
precisely the time when it is needed most. Without a severance agreement,
executives could be tempted to leave the Company for another position which
offers greater security or to oppose a change in control that was in the
stockholders' best interests. In summary, the agreements help motivate key
executives to act objectively and in the stockholders' best interests, even
when their jobs and financial well-being may be threatened by a would-be
acquiror of the Company.
The Board of Directors believes that the Company's severance agreements are
in the Company's best interests and that they create no conflict of interest or
personal incentive adverse to the interests of stockholders.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 4).
STOCKHOLDER PROPOSAL RELATING TO DIRECTORS' RETIREMENT BENEFITS (ITEM NO. 5)
Mr. Kenneth Steiner, 14 Stoner Avenue, Great Neck, New York 11024, who owns
shares of Common Stock with a market value in excess of $1,000, has advised the
Company of his 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 Common Stock, Series A Preferred Stock, Series F
Preferred Stock and Series T Preferred Stock, voting as a single class, present
in person or by proxy at the annual meeting.
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish
their pension benefits."
SUPPORTING STATEMENT OF THE PROPONENT
"Aside from the usual reasons, presented in the past, regarding "double
dipping,' that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place of employment, and in
many instances serving as outside pensioned directors with other companies,
there are other more cogent reasons that render this policy as unacceptable.
"Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
"But more importantly, outside directors, although retained by corporate
management, namely the C.E.O., are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants
to outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become
28
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another device to enhance and entrench management's controls over corporate
policies while being accountable only to themselves. As a founding member of
the Investors Rights Association of America I feel this practice perpetuates a
culture of corporate management "cronyism' that can easily be at odds with
shareholder and company interest.
"A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstrate that those companies
that offer pensions have a better performance record than their non-pensioned
peers? In addition, do we have any evidence of a significant improvement in
corporate profitability with the advent of pensions for outside directors?
"I URGE YOUR SUPPORT. VOTE 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.
Current non-employee directors of the Company are eligible to receive
relatively modest retirement benefits if they have served for specified periods
of time. 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 percent of the increase in retainer paid to active
directors. The current annual retainer for the Company's active directors is
$18,000.
As the proponent recognizes, many companies offer their outside directors
pensions. A recent examination of more than 800 proxy statements of American
corporations indicates that almost half of the companies studied provided these
benefits (Korn/Ferry International Twenty-Second Annual Board of Directors
Study--1995). In fact, because many companies do not disclose in their proxy
statements the benefits provided to outside directors, it is likely that the
actual figure is higher. The Compensation Committee recommended the adoption of
the current retirement plan for outside directors in 1987 after surveying
trends among U.S. corporations and reviewing recently adopted plans of several
large corporations.
The Company does not believe that it is in its stockholders' best interests
to restrict the Company's ability to determine appropriate levels of retirement
benefits for directors. Because of the many challenges currently facing the
Company, it needs the services of experienced, talented individuals with the
ability to exercise astute judgment and make important decisions about the
Company's future. To encourage those persons to accept directorships and
continue to serve, the Company has decided to afford directors who have
provided designated levels of service to the Company retirement benefits.
The Company believes that the proponent's suggestion that the directors'
retirement benefits contribute to "entrench[ment of] management's controls over
corporate policies" is groundless. The proponent offers no evidence that the
impartiality of the Company's directors has been compromised in any way by the
existence of the retirement plan for directors.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 5).
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STOCKHOLDER PROPOSAL RELATING TO "HIGH-PERFORMANCE WORKPLACE" (ITEM NO. 6)
The Amalgamated Bank of New York Long View Collective Investment Fund, 11-15
Union Square West, New York, New York 10003, which owns 5,300 shares of the
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 Common Stock, Series
A Preferred Stock, Series F Preferred Stock and Series T Preferred Stock,
voting as a single class, present in person or by proxy at the annual meeting.
"RESOLVED: That the stockholders of USAir Group (the "Company' or "USAir')
request that the Board of Directors commit our Company to the goal of
creating a high-performance workplace based on policies of workplace
democracy and meaningful worker participation, and prepare a report to be
delivered to the stockholders of the Company no later than two months prior
to the next annual meeting of stockholders at reasonable expense
identifying the extent to which the Company is implementing a high-
performance workplace based on those policies, using the criteria set out
in the U.S. Department of Labor's (the "Labor Department') 1994 report,
Road to High-Performance Workplaces: A Guide to Better Jobs and Better
Business Results (the "1994 Report')."
SUPPORTING STATEMENT OF THE PROPONENT
"The American workplace is undergoing significant changes and restructuring
to meet the challenges of global competition in the 21st century. USAir should
be a leader in creating a workplace which allows it to compete in a global
marketplace.
"Presently, various companies are working to create "high-performance
workplaces' through policies that emphasize employee training, compensation
linked to performance, direct employee involvement in corporate decision-
making, employment security and a supportive work environment.
"In an August 1993 report entitled High Performance Work Practices and Firm
Performance (the "1993 Report'), the Labor Department found that high-
performance work practices are positively related to both productivity and
long-term financial performance, and that innovative workplace practices may be
crucial to the future competitiveness of American industry.
"In the 1994 Report, the Labor Department published a detailed checklist of
criteria which companies can use to measure their progress towards achieving a
high-performance workplace.
"We believe that high-performance work practices will enhance the Company's
ability to attract, develop and keep good people. In recent years, Fortune's
annual survey of most admired corporations has placed a company's ability to
attract, develop and keep good people among the top three measurements of
corporate reputation.
"Effective employee participation is crucial to developing a high-performance
workplace. Moreover, Congress has recognized the value of a more supportive and
productive workplace through such laws as the Family and Medical Leave Act and
the Americans with Disabilities Act.
"In the 1993 Report, the Labor Department indicated that "[t]here appears to
be a widespread firm interest in using new workplace practices.' The Labor
Department is encouraging companies to create high-performance workplaces as a
way to boost American competitiveness, and it has encouraged investors to
consider workplace practices in making their decisions. Investors may lack
sufficient data to properly evaluate
30
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the Company's efforts to create a high-performance workplace. Therefore, we
request that the Company affirm its commitment to these principles and prepare
a report on its actions for implementing them.
"WE URGE YOU TO VOTE FOR THIS RESOLUTION!"
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company is already committed to the goal of creating a "high-performance
workplace." The 1994 Report, which describes the "road to high-performance
workplaces," discusses the importance of, among other things, employee
training, employee participation in workplace decisions, flattening the
organizational structure of a company, labor-management partnerships,
performance- and skilled-based compensation, a supportive work environment and
the integration of human resource policies and workplace practices with
business strategies. The Company is addressing many of these issues as part of
its ongoing efforts to achieve $1 billion in annual cost savings in order to
return to profitability.
As part of its efforts, the Company is pursuing organizational and structural
changes, reengineering and initiatives to increase productivity. Certain of
these efforts are part of a plan launched in 1994 called the "Continuous
Improvement Program" ("CIP"). Management and union employees are working
closely together to redesign work processes. Certain departments are employing
self-directed work teams, which eliminate unnecessary layers of management and
permit employees to work together to decide how best to perform their jobs and
solve problems. The Company is using CIP to change the corporate culture. The
program aims to foster an environment of teamwork by improving communication
within and between departments. The Company is also committed to the training
and development of its employees and is dedicated to passenger and employee
safety. In fact, it is currently evaluating new training initiatives. In
addition, the Company is redesigning and implementing performance management
initiatives for each department. Performance management involves monitoring
employees' performance against targets that reflect the Company's goals.
Compensation will be linked to individual and team performance as evaluated
through this program. The measures highlighted above are just a few examples of
the Company's programs designed to enhance the workplace and improve the
Company's results of operations.
Certain of the above initiatives, as well as others, are described in more
detail in "An Interview with the President", an article in the Company's 1994
Annual Report that was distributed to all stockholders. In addition, the
Company describes its efforts in its public filings with the SEC and less
formally through interviews with newspaper reporters and conference calls with
industry analysts. Thus, the Company is already dedicated to communicating to
its stockholders its endeavors to achieve a high-performance workplace and
improve its financial results. The proposal would require that a report be
prepared and disseminated to stockholders using the several dozen criteria in
the 1994 Report's "Workplace Practice Checklist." The Company believes that
preparing a report responsive to this lengthy checklist would be a time-
consuming exercise requiring the efforts of employees whose services are needed
elsewhere. Further, the production and dissemination of this report would add
to the Company's expenses at a time when it is trying to reduce costs.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 6).
STOCKHOLDER PROPOSAL RELATING TO POLITICAL CONTRIBUTIONS (ITEM NO. 7)
Mrs. Evelyn Y. Davis, The Watergate Office Building, 2600 Virginia Avenue,
N.W., Suite 215, Washington, D.C. 20037, who owns 250 shares of 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
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<PAGE>
by the Board of Directors, would require 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 by proxy at the annual meeting.
"RESOLVED: That the shareholders recommend that the Board direct management
that within five days after approval by the shareholders of this proposal,
the management shall publish in newspapers of general circulation in the
cities of New York, Washington, D.C., Detroit, Chicago, San Francisco, Los
Angeles, Dallas, Houston and Miami, and in the Wall Street Journal and
U.S.A. Today, a detailed statement of each contribution made by the
Company, either directly or indirectly, within the immediately preceding
fiscal year, in respect of a political campaign, political party,
referendum or citizens' initiative, or attempts to influence legislation,
specifying the date and amount of each such contribution, and the person or
organization to whom the contribution was made. Subsequent to this initial
disclosure, the management shall cause like data to be included in each
succeeding report to shareholders. And if no such disbursements were made,
to have that fact publicized in the same manner."
SUPPORTING STATEMENT OF THE PROPONENT
"This proposal, if adopted, would require the management to advise the
shareholders how many corporate dollars are being spent for political
purposes and to specify what political causes the management seeks to
promote with those funds. It is therefore no more than a requirement that
the shareholders be given a more detailed accounting of these special
purpose expenditures than they now receive. These political contributions
are made with dollars that belong to the shareholders as a group and they
are entitled to know how they are being spent.
"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
require the unnecessary expenditure of funds by the Company and would not
provide stockholders with any appreciable benefit in return, and it urges
stockholders to vote against the resolution.
The Company complies with all federal, state and local laws relating to
political contributions. It believes that essentially all information requested
by the stockholder's proposal is publicly available. The significant expense
that would be required for the Company to provide this same information by
purchasing advertising space in various U.S. newspapers and publishing a
separate report to stockholders or including the requested information in other
reports to stockholders cannot be justified.
The total amount of the Company's corporate political contributions is quite
small and is insignificant in relation to the Company's business. The Company's
corporate policy prohibits the use of Company funds or assets for federal
political campaign contributions, in accordance with federal law. Contributions
made by the USAir Political Action Committee (the "USAir PAC") are fully funded
by employee contributions. The USAir PAC does not contribute any corporate
funds. Records of all contributions made by the USAir PAC are filed with the
Federal Election Commission and are available to the public.
For the foregoing reasons, the Company believes that implementation of the
stockholder's proposal would constitute a waste of corporate assets precisely
at a time when the Company is attempting to reduce costs wherever possible.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE STOCKHOLDER
RESOLUTION (ITEM NO. 7).
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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 1996 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 1996 annual meeting of stockholders, expected
to be held in late May 1996, must be received at the Company's principal
executive offices by January 23, 1996.
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, 1994, 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 Director--
Investor Relations of USAir Group, Inc., USAir Group, Inc., 2345 Crystal Drive,
Arlington, Virginia 22227. Oral requests may be made by telephone to the
following number: (703) 418-5305.
By Order of the Board of Directors,
James T. Lloyd
Secretary
October 17, 1995
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PROXY 1995
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 November 28, 1995 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 AND 2 AND AGAINST PROPOSALS 3, 4, 5, 6 AND 7 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 AND 2
Item 1--Election of 15 nominees for director: Messrs. Bogle, Colodny, DeVito,
Goodman, Harris, Horrigan, LeBuhn, Marshall, Maynard, Medlin, Salizzoni,
Schofield, Smith, Stevens and Mrs. Merriman
For [ ] Withhold [ ]
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT PERSON'S NAME AT LEFT.)
Item 2--Ratification of independent auditors.
For [ ] Against [ ] Abstain [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3, 4, 5, 6 AND 7
Item 3--Consideration of the stockholder resolution regarding confidential
voting.
For [ ] Against [ ] Abstain [ ]
Item 4--Consideration of the stockholder resolution regarding compensation
contingent on a change of control.
For [ ] Against [ ] Abstain [ ]
Item 5--Consideration of the stockholder resolution regarding Directors' re-
tirement benefits.
For [ ] Against [ ] Abstain [ ]
Item 6--Consideration of the stockholder resolution regarding a "high-
performance workplace".
For [ ] Against [ ] Abstain [ ]
Item 7--Consideration of the stockholder resolution regarding disclosure of
political contributions.
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.
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE [X]
<PAGE>
PROXY 1995
USAIR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VOTING INSTRUCTIONS TO TRUSTEE
USAir, Inc. Employee Stock Ownership Plan
Trustee: State Street Bank and Trust Company
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
October 17, 1995, at the annual meeting of stockholders of USAir Group, Inc. to
be held on November 28, 1995, 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 CONSID-ERED A DIRECTION TO THE TRUSTEE TO VOTE FOR
PROPOSALS 1 AND 2 AND AGAINST PROPOSALS 3, 4, 5, 6 AND 7 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
October 17, 1995, at the annual meeting of stockholders of USAir Group, Inc. to
be held on November 28, 1995, at Arlington, Virginia, or at any adjournment or
adjournments thereof.
(CONTINUED AND TO BE SIGNED, DATED AND VOTED ON REVERSE)
