<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:
[_]CONFIDENTIAL, FOR USE OF THE
[_]Preliminary Proxy Statement 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 GROUP, INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
USAir Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1996
ARLINGTON, VIRGINIA
----------------
April 15, 1996
To the Stockholders of
USAir Group, Inc.
The 1996 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 May 22, 1996 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. The approval of the Company's 1996 Stock Incentive Plan (Item No. 2).
3. The approval of the Company's Nonemployee Director Stock Incentive
Plan (Item No. 3).
4. Ratification of the selection of auditors of the Company for fiscal
year 1996 (Item No. 4).
5. Consideration of two stockholder proposals as described in the
accompanying Proxy Statement (Item Nos. 5 and 6).
6. The transaction of such other business as may properly come before the
meeting.
Eligible stockholders of record at the close of business on April 5, 1996
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
Michelle V. Bryan
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
MAY 22, 1996
----------------
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 May 22, 1996. 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 April 15, 1996.
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.
Stockholders of record (other than holders of the Series B Preferred Stock
(as defined below)) at the close of business on April 5, 1996 (the "Record
Date") are entitled to vote at the meeting. On April 5, 1996 the Company had
outstanding 63,501,760 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, determined as if each holder of Series A Preferred
Stock, Series F Preferred Stock and Series T Preferred Stock had converted such
shares of preferred stock into Common Stock immediately prior to the Record
Date, present in person or represented by proxy at the meeting and entitled to
vote, voting together as a single class, is required (i) to approve the
Company's 1996 Stock Incentive Plan (Item No. 2), (ii) to approve the Company's
Nonemployee Director Stock Incentive Plan (Item No. 3), (iii) to ratify the
Board of Directors' appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for 1995 (Item No. 4) and (iii) to approve each
of the stockholder proposals (Items Nos. 5 and 6). Therefore, abstentions as to
these particular proposals will have the same effect as votes against such
proposals. Broker non-votes as to these particular proposals, however, will be
deemed shares of stock not entitled to vote on such proposals, will not be
counted as votes for or against such proposals, and will not be included in
calculating the number of votes necessary for approval of such proposals.
BENEFICIAL SECURITY OWNERSHIP
The following information pertains to Common Stock, Series A Preferred Stock,
Series F Preferred Stock, Series T Preferred Stock and Depositary Shares
("Depositary Shares"), each representing 1/100 of a share of the Company's
$437.50 Series B Cumulative Convertible Preferred Stock, without par value
("Series B Preferred Stock"), beneficially owned by all directors, nominees for
director and executive officers of the Company as of January 31, 1996. 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 J. Ayling............................. --(3) (3)
Robert W. Bogle.............................. 1,500
Edwin I. Colodny............................. 84,512(4)
Mathias J. DeVito............................ 700
Rakesh Gangwal............................... --(5)
George J. W. Goodman......................... 200 Depositary Shares(6)
John W. Harris............................... 400
Edward A. Horrigan, Jr....................... 500
Robert LeBuhn................................ 8,000
Roger P. Maynard............................. --(3) (3)
John G. Medlin, Jr........................... 2,000
Hanne M. Merriman............................ 1,500
Raymond W. Smith............................. 500
Derek M. Stevens............................. --(3) (3)
Stephen M. Wolf.............................. --(7)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
OWNER SHARES(1) CLASS(2)
----- ----------- ----------
<S> <C> <C>
EXECUTIVE OFFICERS
Seth E. Schofield............................ 482,889(8)
Frank L. Salizzoni........................... 192,800(9)
W. Thomas Lagow.............................. 185,711(10)
James T. Lloyd............................... 208,992(11)
John R. Long III............................. 129,539(12)
25 directors, nominees for director and execu-
tive officers of the Company as a group........ 1,687,872.5(13) 2.7%
</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 January 31, 1996.
(3) 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.
Ayling, Maynard and Stevens are Chief Executive, Director of Investments
and Acquisitions 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. Ayling, 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.
(4) The listing of Mr. Colodny's holding includes 40,000 shares of Common
Stock issuable within 60 days of January 31, 1996 upon exercise of stock
options.
(5) See page 15 for a description of Mr. Gangwal's rights to obtain shares of
Common Stock subject to certain restrictions upon disposition
("Restricted Stock") and stock options.
(6) Mr. Goodman's holding of Depositary Shares is convertible into 498.5
shares of Common Stock.
(7) See page 15 for a description of Mr. Wolf's rights to obtain certain
shares of Restricted Stock and stock options.
(8) The listing of Mr. Schofield's holdings includes 390,569 shares of Common
Stock issuable within 60 days of January 31, 1996 upon exercise of stock
options.
(9) The listing of Mr. Salizzoni's holdings includes 177,800 shares of Common
Stock issuable within 60 days of January 31, 1996 upon exercise of stock
options.
(10) The listing of Mr. Lagow's holding includes 153,211 shares of Common
Stock issuable within 60 days of January 31, 1996 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 January 31, 1996 upon exercise of stock
options.
(12) The listing of Mr. Long's holding includes 96,472 shares of Common Stock
issuable within 60 days of January 31, 1996 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
1,292,893 shares of Common Stock issuable within 60 days of January 31,
1996 upon exercise of stock options and 135,500 shares of Restricted
Stock.
Effective December 31, 1995 the Retirement Plan for Outside Directors of
USAir Group, Inc. was terminated and the value of the accrued benefits for
past service was converted into units of phantom stock of the Corporation
("Deferred Stock Units") based on the average price of the stock in the month
of December 1995. Set forth below are the number of Deferred Stock Units held
by each director and nominee for director. Although each Deferred Stock Unit
represents the economic equivalent of a share of Common Stock, no voting
rights are attached thereto and the Deferred Stock Units lack certain other
attributes of Common Stock.
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
OWNER DEFERRED STOCK UNITS
----- --------------------
<S> <C>
DIRECTORS AND NOMINEES FOR DIRECTOR
Robert J. Ayling...................................... - 0 -
Robert W. Bogle....................................... - 0 -
Edwin I. Colodny...................................... 8,941.54
Mathias J. DeVito..................................... 8,069.29
Rakesh Gangwal........................................ - 0 -
George J. W. Goodman.................................. 8,069.29
John W. Harris........................................ 1,325.49
Edward A. Horrigan, Jr................................ 8,640.53
Robert LeBuhn......................................... 7,111.38
Roger P. Maynard...................................... - 0 -
John G. Medlin, Jr.................................... 7,185.42
Hanne M. Merriman..................................... 4,239.13
Raymond W. Smith...................................... 2,694.78
Derek M. Stevens...................................... - 0 -
Stephen M. Wolf....................................... - 0 -
</TABLE>
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 January 31, 1996, more than 5% of its Common Stock,
Series A Preferred Stock, Series F Preferred Stock and Series T Preferred
Stock are listed below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
-------------- ------------------- ----------------------- --------
<C> <S> <C> <C>
Series A Preferred Stock Berkshire 358,000(2) 100%(3)
Hathaway
Inc.
1440
Kiewit
Plaza
Omaha,
Nebraska
68131
Series F Preferred Stock BritAir 30,000(4) 100%(5)
Acquisition
Corp. Inc.
75-20
Astoria
Blvd.
Jackson
Heights,
New York
11370
Series T Preferred Stock BritAir 9,919.8(6) 100%(5)
Acquisition
Corp. Inc.
75-20
Astoria
Blvd.
Jackson
Heights,
New York
11370
Common Stock FMR Corp. 7,152,012(7) 11.3%
82
Devonshire
Street
Boston,
Massachusetts
02109
Common Stock Torchmark 5,385,301(8) 8.6%
Corporation
2001 Third
Avenue
South
Birmingham,
Alabama
35233
Common Stock The 5,657,125(9) 9.0%
Equitable
Companies
Incorporated
787
Seventh
Avenue
New York,
New York
10019
</TABLE>
- -------
(1) Represents percent of class of stock outstanding on January 31, 1996.
(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.
(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
4
<PAGE>
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, are also
owned by this person. As disclosed above, three directors of the Company,
Messrs. Ayling, 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) As set forth in a Schedule 13D amendment dated February 28, 1996, FMR
beneficially owns, through Fidelity Management & Research Company
("Fidelity"), as advisor to fifteen investment companies and other funds
(the "Fidelity Funds"), 6,418,794 shares (including shares issuable upon
the conversion of 71,000 Depositary Shares), and through Fidelity
Management Trust Company, as trustee or managing agent for various private
investment accounts (the "Accounts"), 733,218 shares (including shares
issuable upon the conversion of 238,500 Depositary Shares). FMR has the
sole power to dispose of the shares held by the Fidelity Funds and the
Accounts. The power to vote or direct the voting of the shares held by the
Fidelity Funds resides within the boards of trustees of such funds.
Fidelity carries out the voting of such shares under written guidelines
established by such trustees. FMR has sole power to vote or direct the
voting of the shares held by the Accounts.
(8) As set forth in a Schedule 13G dated February 14, 1996, as of December 31,
1995, Waddell & Reed Investment Management Company has sole voting power
and sole dispositive power over 3,880,300 of these shares. Each of Waddell
& Reed, Inc., Waddell & Reed Financial Services, Inc., United Investors
Management Company, Liberty National Life Insurance Company and Torchmark
Corporation claims sole voting and dispositive power over 5,385,301
shares.
(9) As set forth in a Schedule 13G dated February 9, 1996, as of December 31,
1995, the Equitable Life Assurance Society of the United States has sole
voting power and sole dispositive power over 1,379,300 of these shares and
Alliance Capital Management L.P. has sole voting power and sole
dispositive power over 4,277,825 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.
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.
On March 7, 1994, BA announced that it would not make any additional
investments in the Company until the outcome of measures by the Company to
reduce costs and improve its financial results was known. On January 19, 1996,
BA announced that it would not exercise its option to make any further
investment in the Company prior to the January 21, 1996 deadline provided for
in the Investment Agreement. Under the terms of the Investment Agreement,
assuming the Series F Preferred Stock or any shares issued upon conversion
thereof were outstanding and BA had 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 had been 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"). The Investment Agreement
provides that, on or prior to January 21, 1998, assuming that BA had purchased
(or was purchasing simultaneously in accordance with the terms of the
Investment Agreement) Series C Preferred Stock, BA would have the option to
purchase 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 Company debt
securities ("BA Notes"). Because BA did not elect prior to January 21, 1996 to
make the Second Purchase, it cannot make the Final Purchase, except that if
the DOT approves all the transactions and acts contemplated by the Investment
Agreement on or prior to January 21, 1998, at the election of either BA or the
Company, BA's purchase of the Series C Preferred Stock and the Series E
Preferred Stock would be consummated under certain circumstances. Because BA
did not elect to purchase the Series C Preferred Stock by January 21, 1996 the
Company may at
5
<PAGE>
its option redeem, in whole or in part, Series F Preferred Stock and a like
percentage of Series T Preferred Stock held by BA at the higher of market value
or the price of $10,000 per share, plus accrued dividends. Under Delaware law,
the Company may be subject to certain legal prohibitions on its ability to
repurchase or redeem its own shares of capital stock for cash or other
property. The Company cannot predict whether or when the Second Purchase and
Final Purchase will be consummated or whether or when the Company will
repurchase or redeem its own shares of capital stock.
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--Likelihood of No Future Investments by British Airways" and "--
British Airways Investment Agreement" in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
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 persons designated by BA 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 of the
Company (currently 15) 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. Ayling, Maynard and Stevens. Each of the nominees listed
below is currently a director of the Company. Each of the nominees listed below
other than Messrs. Ayling, Gangwal and Wolf was elected in 1995 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.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Robert Ayling, 49... Mr. Ayling was appointed Chief Executive of BA 1996
in January 1996. He was Director of Marketing
and Operations of BA from September 1991 until
his appointment as Group Managing Director in
February 1993 and has been a member of the BA
Board of Directors since 1991. Mr. Ayling is a
Director of Sun Alliance and London Insurance
Plc and is a lawyer by profession.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Robert W. Bogle, 57..... Mr. Bogle is President and Chief Executive Offi- 1995
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 Athletic 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 operated by African
Americans. He is a member of the Audit and
Safety Committees of the Board of Directors.
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,
Ascent Entertainment Group, Inc. and Esterline
Technologies, Inc., and is a member of the Board
of Trustees of the University of Rochester. He
is a member of the Finance and Planning and Nom-
inating 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, Allied Irish Banks plc, and
subsidiaries of The Rouse Company. He is a mem-
ber of the Board of the Maryland Institute, Col-
lege of Art, Chairman of the Board of Empower
Baltimore Management Corporation and former
Chairman of the Greater Baltimore Committee. Mr.
DeVito is Chairman of the Human Resources Com-
mittee and a member of the Finance and Planning
and Safety Committees of the Board of Directors.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Rakesh Gangwal, 42...... Mr. Gangwal became President and Chief Operating 1996
Officer of the Company and USAir on February 19,
1996. Prior thereto, Mr. Gangwal had served as
Executive Vice President--Planning and Develop-
ment of Air France since November 1994. Mr.
Gangwal previously served in a variety of man-
agement roles at United Air Lines over an elev-
en-year period, culminating in the role of Se-
nior Vice President--Planning.
George J. W. Goodman, Mr. Goodman is President of Continental Fideli- 1978
65..................... 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 International Rela-
tions at Princeton University, and is a Trustee
of the Urban Institute. He is a member of the
Human Resources and Finance and Planning Commit-
tees 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.
Edward A. Horrigan, Jr., Mr. Horrigan is the former Chairman of the Board 1987
66..................... 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
Robert LeBuhn, 63....... Mr. LeBuhn was the Chairman of Investor Interna- 1966
tional (U.S.), Inc. (investments) until his re-
tirement in December 1994. 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.
Roger P. Maynard, 52.... Mr. Maynard has been Director of Investments and 1993
Acquisitions of BA since December 1995. Previ-
ously, from 1987, he had held various positions
at BA, including Director of Corporate Strategy,
Director of Investor Relations & Marketplace
Performance and Executive Vice President North
America. Mr. Maynard is a Director of Qantas
Airways Limited. He is a member of the Nominat-
ing, Human Resources and Safety Committees of
the Board of Directors.
John G. Medlin, Jr., 62. 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 Human
Resources Committee of the Board of Directors.
Hanne M. Merriman, 54... 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 Illi-
nois 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 Reserve Bank
of Richmond, Virginia from 1984-1990 and served
as Chairman in 1989-1990. Mrs. Merriman is
Chairman of the Audit Committee and is a member
of the Nominating and Safety Committees of the
Board of Directors.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
SINCE
---------
<S> <C> <C>
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 Carnegie Mellon Univer-
sity and is active in many civic and cultural
organizations. He is a member of the Human Re-
sources and Nominating Committees of the Board
of Directors.
Derek M. Stevens, 57.... Mr. Stevens has been Chief Financial Officer of 1993
and a Director of BA since 1989. From 1981 to
1989 he was Finance Director of TSB Group plc
(financial institution). He is a Director of
Commercial Union Plc. Mr. Stevens is a member of
the Audit Committee of the Board of Directors.
Stephen M. Wolf, 54..... Mr. Wolf is Chairman of the Board of Directors 1996
and Chief Executive Officer of the Company and
USAir and was elected to those positions in Jan-
uary 1996. Immediately prior to joining USAir,
Mr. Wolf was a senior advisor to the investment
bank Lazard Freres & Co. Mr. Wolf was Chairman,
President and Chief Executive Officer, UAL Cor-
poration, and President and Chief Executive Of-
ficer of United Air Lines, Inc. from December
1987 until July 1994. Mr. Wolf was Chairman,
President and Chief Executive Officer of United
from May 1988 until July 1994. Previously, Mr.
Wolf served as Chairman, President and Chief Ex-
ecutive Officer of Tiger International, Inc.
(1987) in addition to serving as Chairman. Pres-
ident and Chief Executive Officer of the Flying
Tiger Line (1985-1987), and he was President and
Chief Executive Officer of Republic Airlines,
Inc. during 1984-1986. Mr. Wolf is a Director of
Philip Morris Companies, R.R. Donnelley & Sons
Co. and the Alzheimer's Disease and Related Dis-
orders Association. He is also a trustee of
Northwestern University and Rush-Presbyterian-
St. Luke's Medical Center.
</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
1995 and has also provided such services during 1996.
10
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held seven meetings in 1995. The Board
of Directors has established the following standing committees: Finance and
Planning Committee, Human Resources Committee, Audit Committee, Nominating
Committee and Safety Committee. During 1995, the Finance and Planning Committee
held four meetings, the Human Resources Committee held six meetings, the Audit
Committee held seven meetings and the Nominating Committee held two meetings.
The Safety Committee became a standing committee in 1995 and held two meetings.
In 1995, a Special Committee formed to review proposals for strategic alliances
with other carriers and held eight meetings and a Search Committee formed to
identify and retain a new Chairman and Chief Executive Officer and held three
meetings.
The Human Resources 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 Human Resources
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 1995, each of the incumbent directors seeking reelection, other than
Mr. Smith, attended 75 percent or more of the meetings of the Board of
Directors and of the committees on which the director served. Mr. Smith was
present at 73% of the meetings.
COMPENSATION OF DIRECTORS
The annual retainer and meeting fee payable to directors in 1995 were $18,000
and $600, respectively (subject to a voluntary 20% reduction from January
through August). The annual retainer was set in 1990 and the meeting fee was
set in 1985. Following a market survey by a compensation consultant, effective
January 1, 1996, those amounts were increased to a $22,000 annual retainer and
a $1,000 meeting attendance fee for nonemployee directors. Mr. LeBuhn, Chairman
of the Finance and Planning Committee, Mr. DeVito, Chairman of the Human
Resources 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. Messrs. Wolf and Gangwal receive
salaries in their capacities as officers of USAir and receive no additional
compensation as directors 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
11
<PAGE>
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. Prior to
1996, the annual retirement benefit paid to retired directors was increased by
an amount equal to 50% of any increase in retainer paid to active directors. If
a director dies prior to retirement and had served for at least five
consecutive years on the Board of Directors, the deceased director's surviving
spouse is eligible under the plan to receive, for a period of five years
following such death, an annual death benefit equal to 50% of the annual
retainer paid to such director at the time of his or her death. If a retired
eligible director dies, the director's surviving spouse is eligible under the
plan to receive, for a period of five years following such death, 50% of the
annual retirement benefit payable to the director at the time of his or her
death. The plan is administered by the Human Resources Committee.
The Company has terminated the retirement plan for directors as of December
31, 1995. Pursuant to such termination, (i) no individual who first becomes a
director on or after December 31, 1995 will participate in the retirement plan
and (ii) directors as of December 31, 1995 will be credited with deferred stock
units equal in value to the present value of their accrued benefits as of
December 31, 1995. Such deferred stock units will be paid in cash following the
director's termination of service.
As described more fully on page 28, upon approval of the stockholders of the
Company, effective in 1996 and thereafter, directors will also receive an
annual grant of 1,500 stock options. Also effective in 1996 and thereafter,
directors will also receive an annual grant of 500 deferred stock units. These
deferred stock units and options will vest after the director serves his or her
full one-year term. The addition of stock-based compensation in lieu of a
retirement plan for directors is designed to increase the alignment of
directors' compensation with stockholder interests.
EXECUTIVE OFFICERS
In January 1996, Stephen M. Wolf was appointed Chairman and Chief Executive
Officer of the Company and USAir, succeeding Seth E. Schofield, who retired
after 38 years with USAir. In February 1996, Rakesh Gangwal was appointed
President and Chief Operating Officer of the Company and USAir, succeeding
Frank L. Salizzoni. Also in February 1996, Lawrence M. Nagin was appointed
Executive Vice President Corporate Affairs and General Counsel of the Company,
succeeding James T. Lloyd.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The Summary Compensation Table below sets forth the compensation paid during
the years indicated to each of the Chief Executive Officer and the four
remaining most highly compensated executive officers of the Company (including
its subsidiaries).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------- ------------------------
OTHER
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(E) AWARDS(F) OPTIONS COMPENSATION(H)
------------------ ---- -------- -------- --------------- ---------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Seth E. Schofield....... 1995 $417,908(B) $212,500(D) $228,949 -- -- $ 89,967
Chairman and Chief 1994 $500,000 $ 0 $116,136 -- -- $ 74,821
Executive Officer of 1993 $475,635(C) $ 0 $275,601 -- -- $ 64,302
the Company and of
USAir
Frank L. Salizzoni(A)... 1995 $335,600(B) $136,000(D) $ 96,970 -- -- $134,926
President and Chief 1994 $385,769 $ 0 $ 11,020 -- 100,000(G) $167,160(I)
Operating Officer of 1993 $317,558(C) $ 0 $ 45,374 -- -- $ 52,222
the Company and of
USAir
W. Thomas Lagow......... 1995 $325,000 $ 96,688(D) -- $223,125 -- $301,410(J)
Executive Vice 1994 $325,000 $ 0 -- -- -- $286,225(J)
President--Marketing of 1993 $310,058(C) $ 0 -- -- -- $282,521(J)
USAir
James T. Lloyd.......... 1995 $275,000 $ 81,813(D) $ 22,417 $223,125 -- $ 35,441
Executive Vice 1994 $275,000 $ $ 18,705 -- -- $ 40,424
President, General 1993 $257,365(C) $ 0 $ 73,215 -- -- $ 36,188
Counsel and Secretary
of the Company;
Executive Vice
President and General
Counsel of USAir
John R. Long, III....... 1995 $275,000 $ 81,813(D) $ 21,847 $223,125 -- $ 31,467
Executive Vice 1994 $275,000 0 $ 36,458 -- -- $ 10,693
President
--Customer Services 1993 $254,808(C) 0 $133,772 -- -- $ 652
</TABLE>
- --------
(A) Mr. Salizzoni was named President and Chief Operating Officer of the
Company and USAir effective April 1, 1994.
(B) Amounts disclosed reflect a voluntary pay reduction incurred by Messrs.
Schofield and Salizzoni during 1995 of $82,092 and $64,400, respectively.
(C) Amounts disclosed reflect reductions in salary during 1993 of $24,365,
$12,250, $14,942, $10,904 and $7,508 for Messrs. Schofield, Salizzoni,
Lagow, Lloyd and Long, 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) Earned in 1995 but paid in 1996.
(E) Amounts disclosed include for (i) 1995, $221,911, $88,210, $22,417 and
$16,870, (ii) 1994, $108,633, $10,391, $18,705, and $29,410 and (iii)
1993, $271,288, $33,259, $73,215, and $133,772, received by Messrs.
Schofield, Salizzoni, Lloyd and Long, 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) On November 28, 1995, each of Messrs. Lagow, Lloyd and Long were awarded
17,500 shares of Restricted Stock. Amount shown is based on closing price
($12.75) on such date.
(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, individual life insurance
coverage is available to the named officers. In 1993, USAir commenced
paying the premium associated with this coverage. In 1993, 1994 and 1995,
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 the dollar value of premiums paid by USAir with respect to
term life insurance): 1995--Mr.Schofield--$54,135, Mr. Salizzoni--$38,111,
Mr. Lagow--$36,780, Mr. Lloyd--$25,441 and Mr. Long--$20,794: 1994--Mr.
Schofield--$31,194; Mr. Salizzoni--$27,722; Mr. Lagow--$10,225; Mr.
Lloyd--$18,424 and Mr. Long--$644; 1993--Mr. Schofield--$29,328, Mr.
Salizzoni--$26,010, Mr. Lagow--$9,716, Mr. Lloyd--$17,291 and Mr. Long--
$652. During 1993, 1994 and 1995, USAir made contributions to the accounts
of Messrs. Schofield, Salizzoni, Lagow, Lloyd and Long in certain defined
contribution pension plans in the following amounts: 1995--$35,652,
$96,815, $14,630, $10,000 and $10,673, respectively, 1994--$43,627,
$38,192, $26,000, $22,000 and $10,049, respectively, and 1993--$34,974,
$26,212, $22,805, $18,897 and $0, 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 annual installment,
$250,000, of the total payment.
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 1995. None of the officers
exercised any options during 1995. The unexercised options held by one officer
was in-the-money based on the fair market value of the Common Stock on December
29, 1995 ($13.25).
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SAR'S AT OPTIONS/SAR'S AT
NAME YEAR END (#) YEAR-END ($) (1)
---- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Seth E. Schofield.......... 390,569 0 $ 0 $ 0
Frank L. Salizzoni......... 177,800 75,000 $137,500 $412,500
W. Thomas Lagow............ 153,211 0 $ 0 $ 0
James T. Lloyd............. 169,742 0 $ 0 $ 0
John R. Long III........... 100,722 0 $ 0 $ 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 of 1986, as amended (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 were made on behalf of such employee to the
secondary plan. Such contributions were 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 1995, 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 Long 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>
FNAL EARNINGSI NONCONTRIBUTORY PENSION BASED ON YEARS OF SERVICE
A DEFINED INS -----------------------------------------------------
THE PLAN 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................. $ 19,507 $ 29,261 $ 39,014 $ 48,768 $ 53,768 $ 53,768
200,000................. $ 43,507 $ 65,261 $ 87,014 $108,768 $118,768 $118,768
300,000................. $ 67,507 $101,261 $135,014 $168,768 $183,768 $183,768
400,000................. $ 91,507 $137,261 $183,014 $228,768 $248,768 $248,768
500,000................. $115,507 $173,261 $231,014 $288,768 $313,768 $313,768
600,000................. $139,507 $209,261 $279,014 $348,768 $378,768 $378,768
700,000................. $163,507 $245,261 $327,014 $408,768 $443,768 $443,768
800,000................. $187,507 $281,261 $375,014 $468,768 $508,768 $508,768
</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 through the date of freezing of the plan (December
31, 1991) 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. Long--16 years.
USAir has entered into agreements with Messrs. Schofield, Salizzoni, Lagow,
Lloyd and Long 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 and provides for pension benefits to be calculated
using their salary of record rather than the salary in effect under various
salary reduction programs.
EMPLOYMENT ARRANGEMENTS WITH MESSRS. WOLF, GANGWAL AND NAGIN
Under his employment arrangements with the Company, Mr. Wolf is entitled to
an annual base salary of $500,000. In addition, Mr. Wolf is eligible for an
annual bonus pursuant to the terms of the Executive Incentive Plan. Bonus
eligibility will be based on performance criteria established by the Human
Resources Committee or payable at the Committee's discretion if they believe
performance and circumstances are appropriate for such payment. If Mr. Wolf
achieves his target, he will receive a bonus of 50% of annual base salary,
which may be increased for results in excess of the target up to a maximum
bonus of 100% of base salary.
Mr. Wolf is entitled to an award of stock options and restricted stock, as
follows: (i) 1,300,000 stock options effective January 16, 1996, at an exercise
price based on the fair market value of the stock on
15
<PAGE>
January 16, 1996 ($12.1875) with 500,000 options vesting immediately on January
16, 1996, 575,000 options vesting on January 16, 1997, 75,000 options vesting
on January 16, 1998, 75,000 options vesting on January 16, 1999, and the
remaining 75,000 options vesting on January 16, 2000, and (ii) 325,000 shares
of restricted stock, effective January 16, 1996, vesting ratably on the first
through fourth anniversaries of the effective grant date.
The Company has entered into a supplemental retirement agreement with Mr.
Wolf which will provide him with a pension benefit under the formula contained
in USAir's frozen defined benefit pension plan for salaried employees, on the
basis that he had "deemed credited service" under the plan for all of his 29
years of service within the airline industry and without regard to certain
limitations set forth in the Code. Benefits will be calculated on the
assumption that Mr. Wolf's annual compensation has been and will remain at the
rate of the annual base salary set forth above and the maximum bonus described
above has been earned. Mr. Wolf became vested in 25% of this supplemental
benefit on the date of his employment and will become incrementally vested in
the remainder of this supplemental benefit ratably over a period of three years
from the date of his employment. This benefit is subject to an offset for
benefits payable as a result of contributions from USAir to the tax-qualified
and non-qualified defined contribution retirement program for salaried
employees of USAir.
Under their employment arrangements with the Company, Messrs. Gangwal and
Nagin are entitled to annual base salaries of $400,000 and $340,000,
respectively. Upon employment, Mr. Gangwal became entitled to the purchase and
assignment by USAir of an annuity with an after-tax value of $1 million and Mr.
Nagin received a $275,000 signing bonus. Both Mr. Gangwal and Mr. Nagin are
eligible for an annual bonus pursuant to the terms of the Company's Executive
Incentive Plan. Bonus eligibility will be based on performance criteria to be
established by the Human Resources Committee or payable at the Committee's
discretion if they believe performance and circumstances are appropriate for
such payment. If Mr. Gangwal and Mr. Nagin achieve their targets, they will
receive a bonus of 50% and 35% of their annual base salary, respectively, which
may be increased for results in excess of the target up to a maximum bonus of
100% and 70% of their base salaries, respectively. Messrs. Gangwal and Nagin
are entitled to awards of 850,000 and 225,000 stock options, respectively,
effective January 31, 1996, at an exercise price of $14.875 (the fair market
value on January 31, 1996), with 20% of the respective options vesting
immediately on such dates and an additional 20% vesting on the first through
fourth anniversaries of such dates.
Messrs. Gangwal and Nagin received 250,000 and 50,000 shares, respectively,
of restricted stock, with 50,000 and 10,000 shares, respectively, vesting
immediately on February 19 and 6, 1996, respectively, and 20% of each such
grant vesting on the first through fourth anniversaries of such dates.
USAir will enter into a supplemental retirement agreement with each of Mr.
Gangwal and Mr. Nagin which will provide each with a pension benefit under the
formula contained in USAir's frozen defined benefit pension plan for salaried
employees, on the basis that each had "deemed credited service" under the plan
accruing at the rate of: (1) five (Mr. Gangwal) or four (Mr. Nagin) years of
"deemed service" for each year of actual service up through the fifth year of
employment of each; and (2) one year of service for each year of actual service
after five years of employment; up to a maximum of 30 years of credited
service. The benefits will be calculated on actual base salary and the
assumption that the maximum bonus described above has been earned. This benefit
is subject to an offset for benefits payable as a result of contributions from
USAir to the tax-qualified and non-qualified defined contribution retirement
program for salaried employees of USAir.
The stock options granted to Messrs. Wolf, Gangwal and Nagin and Mr. Wolf's
restricted stock grant are subject to stockholder approval of a new stock
incentive plan. In the event that the stockholders fail to
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approve a new plan, Messrs. Wolf, Gangwal and Nagin are entitled to substitute
awards of equivalent economic value.
In connection with their employment arrangements, each of Messrs. Wolf,
Gangwal and Nagin also received relocation assistance (and, in the case of
Messrs. Gangwal and Nagin, tax reimbursement related thereto) and became
entitled to reimbursement of fees for certain tax and financial planning
advice. Each of Messr. Wolf's, Gangwal's and Nagin's stock options and
restricted stock and benefits under the supplemental retirement agreement will
vest immediately upon a change-of-control, a termination of employment without
cause or upon resignation for good reason.
The Company will enter into agreements substantially similar to the
Employment Contracts (described below) with each of Messrs. Wolf, Gangwal and
Nagin.
ARRANGEMENTS CONCERNING TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
In connection with their respective retirements, the Company entered into
certain arrangements with Messrs. Schofield, Salizzoni and Lloyd.
Pursuant to an agreement approved by the Board of Directors, in consideration
for his past services to USAir and for services between the date of the letter
agreement and the time of his retirement, USAir agreed to provide Mr. Schofield
with (i) payments required under his employment agreement with the Company for
termination upon mutual agreement paid as if such termination was by Mr.
Schofield for "good reason", (ii) a six-month consulting arrangement and (iii)
supplemental pension benefits based on his salary of record, as described
below.
Upon his retirement, Mr. Schofield received an aggregate of $1,719,231
pursuant to the terms of his Employment Agreement and became entitled to
receive payment for his six-month consulting arrangement at his salary rate in
effect on the date of his retirement ($500,000).
Mr. Schofield's supplemental pension benefit will be calculated as follows:
(a) the pension benefit calculated under the benefit formula set forth in the
USAir Retirement Plan as if the Retirement Plan had not been frozen in 1991 and
using Mr. Schofield's salary of record, rather than reduced salary, for the
years 1992, 1993, 1994 and 1995, less (b) the benefits payable to Mr. Schofield
in the aggregate under any qualified and nonqualified pension plans of USAir
(the "Pension Plans"), to the extent such benefits are attributable to
contributions made by USAir, and (c) without regard to certain limitations set
forth in the Code. The supplemental benefit payable shall be unfunded and shall
be paid directly from USAir's general assets.
In connection with their resignations as executive officers effective
February 19, 1996 and February 5, 1996, respectively, Mr. Salizzoni and Mr.
Lloyd agreed to remain employees of USAir through March 31, 1996 and April 4,
1996, respectively, to assist their successors in transition. During the period
of employment from February 19 through March 31, 1996 in the case of Mr.
Salizzoni and February 5, 1996 through April 4, 1996 in the case of Mr. Lloyd,
each received (or will receive) his base salary and all other compensation and
benefits applicable to his previous position as a senior officer. Upon their
retirements, Mr. Salizzoni received an amount equal to his base salary payable
from April 1, 1996 through the remainder of the "employment period" ending on
November 12, 1999 (an aggregate of $1,446,000) and Mr. Lloyd received an amount
equal to his base salary payable from April 4, 1996 through the remainder of
the "employment period" ending on June 29, 1999 (an aggregate of $953,077).
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USAir agreed to provide Mr. Salizzoni and Mr. Lloyd with (a) service credit,
(b) age credit, and (c) earnings credit at their respective 1996 base salary
rates, through the remainder of the Employment Period under their Employment
Agreements (i.e., through November 12, 1999 for Mr. Salizzoni and June 29, 1999
for Mr. Lloyd) under their respective supplemental pension arrangements. In
addition, certain options held by Mr. Salizzoni lapsed and certain unvested
options (with respect to 75,000 shares) vested and certain shares of restricted
stock held by Mr. Lloyd were forfeited and the restrictions on certain shares
of restricted stock (with respect to 5,250 shares) lapsed.
USAir currently has employment contracts (the "Employment Contracts") with
the executive officers (the "Executives") named in the Summary Compensation
Table who remain employees of the Company. 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
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.
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. In addition, except under certain
circumstances, during the 30-day period immediately following the first
anniversary of a change of control any Executive could elect to terminate his
or her Employment Contract for any reason and receive the liquidated damages
described in the immediately preceding sentence. Each Employment Contract
provides that if USAir breaches the Employment Contract, as described above,
each Executive shall be entitled to recover from USAir reasonable attorney's
fees in connection with enforcement of such Executive's rights under the
Employment Contract. Each Employment Contract also provides that any payments
the Executive receives in the event of a termination after a change of control
shall be increased, if necessary, such that, after taking into account all
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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.
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 under the Plans to the Company for a cash payment
equal to, in the case of options not issued in tandem with stock appreciation
rights, the excess, if any, of the fair market value of the Common Stock over
the exercise prices of such stock options or, in the case of options issued in
tandem with stock appreciation rights, the positive value of such stock
appreciation rights.
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 HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS
The policies of the Human Resources Committee of the Board of Directors (the
"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
performance criteria 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 Committee plays an active role in the
oversight and review of all compensation paid to executive officers of the
Company. The 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. The 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") and other companies of comparable size. 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
on these comparisons, the Committee established the base salary for the Chief
Executive Officer and other executive officers.
While the 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,
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after an independent compensation consultant conducted a study of comparable
airline officers' salaries, the 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, Mr. Schofield's base salary was
lower than the base salaries for the chief executive officers of Delta, United,
American and Southwest Airlines, Inc. Mr. Schofield did not participate in
Committee or Board of Directors deliberations or decision-making regarding any
aspect of his compensation. As discussed above, Mr. Schofield has retired from
his positions as Chairman and Chief Executive Officer of the Company and USAir.
The principal elements of the Company's compensation paid to the executive
officers with respect to 1995 are discussed below.
Base Salary. As reported by the Committee in prior reports, the 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 Committee has awarded merit increases based on measuring
individual performance against objectives. However, due to the Company's poor
financial performance since 1989, the 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 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 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. Except as set forth below,
the base salaries established by the Committee in 1993 remained effective
throughout 1995.
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, the 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;
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. 20% of the amount of salary between $50,000 and $100,000; and
. 25% of the amount of salary in excess of $100,000.
Both executive officers signed waivers of the applicable provisions of their
employment agreements guaranteeing a higher level of base salary. In late July
1995, the Company announced that it was ending discussions with USAir's unions
on a wage concession and restructuring package due to unacceptable demands made
by the union representing USAir's pilots. After the discussions with the unions
ended, Messrs. Schofield's and Salizzoni's salaries were restored to their
prior levels.
In response to a significant rate of resignations of officers and management
personnel during 1994 and 1995, the Committee commissioned a review of
competitive compensation programs. In November 1995, the Compensation Committee
approved new base salaries for executive officers (other than the chief
executive officer and chief operating officer) and approved restricted stock
grants to such officers. Such new base salaries became effective January 1,
1996 and were the first increase in officer salary rates since April 1993.
Annual Cash Incentive Compensation. The Committee adopted the Executive
Incentive Compensation Plan effective on January 1, 1988. The plan is
administered by the Committee. All officers, including the executive officers,
and certain other key management employees of the Company are eligible to
participate in the plan.
For fiscal years prior to 1996, the Committee was authorized to grant awards
under this plan only if the Company achieved a two percent or greater return on
sales ("ROS") for a fiscal year. The target level of performance was four
percent ROS. The maximum level of performance recognized under the plan was a
six percent ROS. Additionally, for each officer of the Company, the Committee
has previously set an incentive compensation target percentage and a maximum
percentage. If the Company achieved 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 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 achieved 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
achieved 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 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 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 Committee has never made any such adjustments.
The Company achieved a 3.4% ROS for the fiscal year ended December 31, 1995
(excluding non-recurring items and non-cash accounting charges) and accordingly
paid incentive awards to executives for the 1995 fiscal year. This is the first
year awards have been paid under the plan since payments were made for the
fiscal year ended December 31, 1988.
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In conjunction with the overall compensation review conducted by the
Committee in November of 1995, the Committee approved amendments to the
incentive compensation plan. Future incentive compensation will be paid under
the terms of the amended plan. The amended plan provides for the payment of
both incentive and discretionary awards. The incentive awards are based upon
the executive achieving pre-established performance objectives which will be
established by the Committee annually. Incentive awards will continue to be
paid on the basis of Target Awards established by the Committee. The Target
Awards for executive officers (ranging from 30% to 50% of base salary) remain
the same under the amended plan. The Committee retains the right to adjust an
executive's incentive award based on individual performance; however, the
maximum award may not exceed 200% of the target award (or 60% to 100% of base
salary). The amended plan also provides for discretionary awards to be paid at
the discretion of the Committee in a year in which no incentive awards are
paid.
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 Committee. The 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 Committee determines the size of any option grant under the plans based
upon (i) the 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 and of other companies of comparable
size; (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 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 1995, the only executive officers to be granted options were newly
hired executive officers and executive officers who received promotions. The
stock option awards made in 1995 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 Committee. Under the 1992 Plan, the
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 Committee granted executive officers options under the 1992 Plan in
accordance with the same formula applicable to all other employees of the
Company.
As discussed elsewhere in the Proxy Statement, the Company is requesting
stockholder approval of a new 1996 Stock Incentive Plan (the "1996 Plan"). The
1996 Plan is substantially similar to the 1988 Plan and will govern the awards
of stock options and restricted stock granted to the new executive officers
hired in 1996.
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Restricted Stock. Under the terms of the 1988 Plan and the proposed 1996
Plan, the Committee is authorized to grant awards of Restricted Stock. In 1995,
the Committee granted Restricted Stock to a total of nine executive officers,
one of whom is no longer employed by USAir. These awards were all subject to a
three year vesting schedule, with restrictions lapsing on a percentage of the
award on each anniversary of the award. The awards of Restricted Stock granted
in 1995 were the first Restricted Stock awards granted by the Committee since
1990.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Code. Section 162(m) provides that companies will not be entitled to a tax
deduction for certain compensation paid to certain executive officers to the
extent that the compensation exceeds $1 million in a taxable year. In December
1995, the Internal Revenue Service issued final regulations under Section
162(m). The Committee is studying Section 162(m) and the regulations thereunder
and, if appropriate, the Company will take the necessary measures to maintain
the deductibility of compensation for executive officers.
NEW EXECUTIVE OFFICERS
In connection with their employment in early 1996, each of Messrs. Wolf,
Gangwal and Nagin negotiated compensation packages which are described
elsewhere in the Proxy Statement. Such arrangements were negotiated by the
Company at arms'-length and, in the Committee's judgment, are consistent with
the overall compensation goals and philosophies of the Company. An independent
compensation consultant provided the Committee with an opinion that the
compensation packages for these executives were fair and reasonable considering
the management needs of the Company and competition in the industry.
The 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
[CHART APPEARS HERE]
US Air, Inc. S&P 500 S&P Airline
1990 100 100 100
1991 76.98 126.31 126.82
1992 80.95 131.95 112.71
1993 81.75 141.25 118.25
1994 26.98 139.08 82.41
1995 84.13 186.52 120.2
The above graph compares the performance of the Company's Common Stock during
the period January 1, 1991 to December 31, 1995 with the S&P 500 Index and the
S&P Airline Index during the relevant time period. The graph depicts the
results of investing $100 in the Company's Common Stock, the S&P 500 Index and
the S&P Airline Index, at closing prices on December 31, 1990. The stock price
performance shown on the graph above is not necessarily indicative of future
price performance. The S&P Airline Index consisted of AMR Corporation, Delta
Air Lines, Inc., UAL Corporation and the Company until December 31, 1993 and
AMR, Delta Air Lines, Inc., Southwest Airlines, Inc. and the Company commencing
January 1, 1994.
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APPROVAL OF THE COMPANY'S 1996 STOCK INCENTIVE PLAN (ITEM NO. 2)
The following is a description of the material terms of the 1996 Plan, and as
such is qualified in its entirety by the actual terms of the 1996 Plan, which
is attached hereto as Exhibit A.
The Board of Directors believes that a stock incentive plan is an important
factor in attracting, retaining and motivating key executives. Such a plan
provides a method for offering long-term incentives to those individuals on
whose judgment, initiative and efforts the successful conduct of the Company's
business largely depends. Accordingly, the Board of Directors has approved and
recommends to stockholders the adoption of the 1996 Plan. Subject to approval
by the Company's stockholders, 3.1 million shares of authorized common stock
have been reserved for issuance under the 1996 Plan. No individual may be
granted awards under the 1996 Plan in any one calendar year with respect to
more than an aggregate of 1.65 million shares of the Company's Common Stock.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock, determined as if each holder of Series A Preferred Stock, Series
F Preferred Stock and Series T Preferred Stock had converted such shares of
preferred stock into Common Stock immediately prior to the Record Date, present
in person or represented by proxy at the meeting and entitled to vote, voting
together as a single class, is required for approval of the 1996 Plan.
The 1996 Plan will be administered by the Human Resources Committee. The
Committee is composed entirely of directors who are both "disinterested
directors" (within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and "outside directors" (within the
meaning of Section 162(m) of the Code. All key employees (and prospective key
employees) of the Company and its subsidiaries will be eligible to participate
in the 1996 Plan, with the Committee having discretion to determine who
qualifies as a key employee and the extent of each key employee's participation
in the 1996 Plan. The 1996 Plan may be amended by the Committee.
OPTIONS
Options granted under the 1996 Plan will be either incentive stock options
("ISOs"), as defined under Section 422 of the Code, or nonstatutory stock
options. The purchase price per share of stock for the shares covered by any
options shall not be less than the fair market value of the Company's Common
Stock on the date the option is granted. Options will be exercisable at such
times and pursuant to such conditions as are established by the Committee,
provided however, that no option will be exercisable more than ten years and
one month after it was granted. Payment of the purchase price of any option
shall be made in cash or, in whole or in part, in Common Stock of the Company,
valued at fair market value on the date of exercise.
Generally, options may be exercised within six months after termination of
employment to the extent of shares then purchasable. If the employment of a
holder is terminated for cause, the holder's options shall terminate ten days
after such termination of employment. The Committee may extend the time to
exercise an option, but not beyond the earlier of three years following
termination of employment of the optionee or the option's expiration date.
If, prior to the 1996 Plan's termination, any option should terminate for any
reason without having been exercised in full, the unpurchased shares shall
again become available for options. The proceeds of the sale of stock under the
1996 Plan will constitute general funds of the Company.
RESTRICTED STOCK
All Restricted Stock awarded under the 1996 Plan shall be subject to an award
agreement, the terms and conditions of which shall be established by the Chief
Executive Officer from time to time. Each award agreement shall establish with
respect to the shares awarded to each grantee a "Restricted Period." The
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Restricted Period may differ among grantees and have different expiration dates
with respect to portions of shares of Restricted Stock covered by the same
award. Restricted Stock awarded to grantees may not be sold, encumbered or
otherwise transferred during the Restricted Period and, except as otherwise
provided by the Committee, the shares of Restricted Stock of a grantee who
terminates employment during the Restricted Period with respect thereto shall
be forfeited and returned to the Company. Except for such restrictions,
however, a grantee shall have all of the rights of a stockholder of the Company
including, but not limited to, the right to receive any dividends and the right
to vote such shares. Any shares awarded as Restricted Stock that are forfeited
shall thereafter again become available for awards under the 1996 Plan.
TAX LIABILITY
Subject to the Committee's discretion, agreements between the Company and
grantees in connection with awards of options or Restricted Stock may provide
for the payment by the Company of a supplemental cash payment to grantees
promptly after the exercise of an option or promptly after the date on which
the shares of Restricted Stock awarded are included in the gross income of the
grantee under the Code. Such supplemental cash payments, to the extent
determined by the Committee, shall provide for the payment of such amounts as
may be necessary to result in the grantee not having an incremental tax
liability as a result of such exercise or inclusion in income.
NEW PLAN BENEFITS
As discussed above under "Employment Arrangements with Messrs. Wolf, Gangwal
and Nagin", a total of 2,375,000 options and 325,000 shares of restricted stock
to be issued under the 1996 Plan will be utilized to satisfy contractual
obligations to Messrs. Wolf, Gangwal and Nagin. As awards under the 1996 Plan
are made in the discretion of the Committee, it is not possible to determine
either the other awards that will be made thereunder during 1996 or the awards
that would have been made thereunder during 1995 had the 1996 Plan been in
effect.
FEDERAL INCOME TAX TREATMENT
The following discussion of certain relevant federal income tax effects
applicable to options and Restricted Stock granted under the 1996 Plan is a
brief summary only, and reference is made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevent
federal tax consequences. This summary is not intended to be exhaustive and
does not describe state, local or foreign tax consequences.
In general, an optionee will not be subject to tax at the time a nonstatutory
stock option is granted. Upon exercise of a nonstatutory stock option where the
exercise price is paid in cash, the optionee generally must include in ordinary
income at the time of exercise an amount equal to the excess, if any, of the
fair market value of the Common Stock at the time of exercise over the exercise
price, and will have a tax basis in such shares equal to the cash paid upon
exercise plus the amount taxable as ordinary income to the optionee. If the
holder receiving the shares is restricted from selling the shares because the
holder is subject to reporting under Section 16(a) of the Exchange Act
(generally an executive officer or director of the Company) and would be
subject to liability under Section 16(b) of the Exchange Act (an "Insider"),
then, unless the holder makes an election under Section 83(b) of the Code
within 30 days after exercise to be taxed under the rule of the preceding
sentence, (i) the holder will recognize taxable ordinary income at the time the
Section 16(b) restriction terminates, (ii) the amount of such ordinary income
will be equal to the excess, if any, of the fair market value of the shares of
Common Stock at that time over the exercise price, (iii) the holder's tax basis
in such shares will be the fair market value at that time, (iv) the holder's
holding period for the shares will
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begin at that time, and (v) any dividends the holder receives on the shares
before that time will be taxable to the holder as compensation income.
Pursuant to the revised rules under Section 16(b) of the Exchange Act, the
purchase of Common Stock upon exercise of an option by an optionee who is an
Insider will not be deemed a purchase triggering a six-month period of
potential short-swing liability. Accordingly, unless a non-qualified stock
option is exercised during the six-month period following the date of grant of
the option, the shares would not be considered subject to a substantial risk of
forfeiture as a result of Section 16(b) and the Section 83(b) election
generally would not be significant. Thus, in this context, the taxable event
for the exercise of a nonstatutory stock option that has been outstanding for
at least six months ordinarily will be the date of exercise. If a nonstatutory
stock option is exercised within six months after the date of the grant,
taxation ordinarily would be deferred until the date which is six months after
the date of grant, unless the Insider files an election pursuant to Section
83(b) of the Code to be taxed on the date of exercise.
The Company generally will be entitled to a deduction in the amount of an
optionee's ordinary income at the time such income is recognized by the
optionee upon the exercise of a nonstatutory stock option. Income and payroll
taxes are required to be withheld on the amount of ordinary income resulting
from the exercise of a nonstatutory stock option.
The grant of an ISO does not result in taxable income to an optionee for
Federal income tax purposes, nor is an optionee required to recognize income
upon the exercise of an ISO. The holder may, however, be subject to an
alternative minimum tax in certain instances upon exercise of an ISO. If the
holder of an ISO does not dispose of the stock purchased under such an option
within two years following the date the option was granted, and holds the stock
so acquired for at least one year, the difference between the sale price and
the option price will be taxed to the optionee as long-term capital gain,
rather than as ordinary income. If an optionee disposes of the stock within
either the two-year period or one year period referred to above, the tax
consequences will be the same as those described above with respect to
nonstatutory stock options.
The corporation is not entitled to any tax deduction in connection with the
grant or exercise of an ISO. However, if the optionee disposes of his stock
within the holding periods described above, the Company may be entitled to a
tax deduction for the amount of ordinary income, if any, realized by the
optionee.
In the case of an award of Restricted Stock, a grantee generally will not be
taxed upon the grant of such an award but, rather, will recognize ordinary
income in an amount equal to the fair market value of the Common Stock at the
time the shares are no longer subject to a substantial risk of forfeiture, as
defined in the Code (including as a result of potential liability under Section
16(b) of the Exchange Act). A grantee may make an election under Section 83(b)
of the Code within 30 days after grant of Restricted Stock to be taxed on an
amount equal to the fair market value of the Common Stock at the time of the
grant. If such an election is made, no additional taxable income will be
recognized by such grantee at the time the restrictions lapse. The Company
generally will be entitled to a tax deduction at the time and to the extent
that income is recognized by such grantee.
On April 8, 1996, the closing price of the Company's Common Stock as reported
on the New York Stock Exchange Composite Tape was $18.75 per share.
The Board of Directors recommends that stockholders vote FOR the proposed
1996 Plan.
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APPROVAL OF THE COMPANY'S
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN (ITEM NO. 3)
The following is a description of the material terms of the USAir Group, Inc.
Nonemployee Director Stock Incentive Plan (the "Director Stock Plan"), and as
such is qualified in its entirety by the actual terms of the Director Stock
Plan, which is attached hereto as Exhibit B.
The Director Stock Plan is intended to increase the alignment of the interest
of members of the Board who are Eligible Directors (as defined) with the
interests of stockholders of the Company by providing further opportunity for
ownership of the Common Stock, and to increase their incentive to contribute to
the success of the Company's business through the grant of nonstatutory stock
options entitling the holder to purchase shares of Common Stock (each, a
"Director Option"). Subject to approval by the Company's stockholders, 70,000
shares of common stock have been reserved for issuance under the Director Stock
Plan. The affirmative vote of the holders of at least a majority of the shares
of Common Stock, determined as if each holder of Series A Preferred Stock,
Series F Preferred Stock and Series T Preferred Stock had converted such shares
of preferred stock into Common Stock immediately prior to the Record Date,
present in person or represented by proxy at the meeting and entitled to vote,
voting together as a single class, is required for approval of the Director
Stock Plan.
OPTIONS
The Director Stock Plan provides for the grant to each Eligible Director on
the first business day following each annual meeting of stockholders of the
Company occurring prior to the termination of the Director Stock Plan,
beginning with the 1996 annual meeting of stockholders, a Director Option to
purchase 1,500 shares of Common Stock. An "Eligible Director" is a member of
the Board other than any director who is then an employee of the Company or any
subsidiary of the Company, is serving pursuant to rights exercised by preferred
stockholders of the Company or, in the case of an individual first becoming a
director after January 1, 1996, was not previously an employee of the Company
or any subsidiary. Each Director Option shall be granted at an exercise price
equal to the "fair market value" (as defined in the Director Stock Plan) of the
Common Stock on the date of grant. Each Director Option shall become fully
vested on the earliest to occur of (i) the first anniversary of the date of
grant, (ii) the Eligible Director's death, disability or termination of service
as a director upon the completion of the last term of office to which such
director was elected, or (iii) a "change of control" (as defined in the
Director Stock Plan), and may be exercised in whole or in part at any time
thereafter until the date that is ten years following the date of grant. If for
any reason during the term of an unexercised Director Option the Eligible
Director shall cease to be a member of the Board, such Director Option may be
exercised by the Eligible Director (or his estate) until the second anniversary
of the date that the Eligible Director ceases to be a member of the Board.
The Director Stock Plan shall remain in effect until all Director Options
granted thereunder shall have been satisfied by the issuance of shares of
Common Stock, or terminated under the terms of the Director Stock Plan,
provided that no grants may be made after the tenth anniversary of the
effective date thereof. The Board may at any time and from time to time alter,
amend, suspend, or terminate the Director Stock Plan in whole or in part;
provided, however, that the provisions with respect to the grant of Director
Options may not be amended more than every six months, other than to comport
with changes in the Code. The termination or any modification or amendment of
the Director Stock Plan shall not, without the consent of an Eligible Director,
affect his or her rights under a grant of a Director Option.
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NEW PLAN BENEFITS
If the Director Stock Plan is approved by the stockholders of the Company,
during 1996 each Eligible Director will be granted under the terms of the
Nonemployee Director Stock Plan a Director Option to purchase 1,500 shares of
Common Stock.
FEDERAL INCOME TAX TREATMENT
The following discussion of certain relevant federal income tax effects
applicable to Director Options granted under the Director Stock Plan is a brief
summary only, and reference is made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax consequences. This summary is not intended to be exhaustive and
does not describe state, local or foreign tax consequences.
In general, an optionee will not be subject to tax at the time a nonstatutory
stock option is granted. Upon exercise of a nonstatutory stock option where the
exercise price is paid in cash, the optionee generally must include in ordinary
income at the time of exercise an amount equal to the excess, if any, of the
fair market value of the Common Stock at the time of exercise over the exercise
price, and will have a tax basis in such shares equal to the cash paid upon
exercise plus the amount taxable as ordinary income to the optionee. If the
holder receiving the shares is restricted from selling the shares because the
holder is subject to reporting under Section 16(a) of the Exchange Act
(generally an officer or director of the Company) and would be subject to
liability under Section 16(b) of the Exchange Act (an "Insider"), then, unless
the holder makes an election under Section 83(b) of the Code within 30 days
after exercise to be taxed under the rule of the preceding sentence, (i) the
holder will recognize taxable ordinary income at the time the Section 16(b)
restriction terminates, (ii) the amount of such ordinary income will be equal
to the excess, if any, of the fair market value of the shares of Common Stock
at that time over the exercise price, (iii) the holder's tax basis in such
shares will be the fair market value at that time, (iv) the holder's holding
period for the shares will begin at that time, and (v) any dividends the holder
receives on the shares before that time will be taxable to the holder as
compensation income.
Pursuant to the revised rules under Section 16(b) of the Exchange Act, the
purchase of Common Stock upon exercise of an option by an optionee who is an
Insider will not be deemed a purchase triggering a six-month period of
potential short-swing liability. Accordingly, unless a non-qualified stock
option is exercised during the six-month period following the date of grant of
the option, the shares would not be considered subject to a substantial risk of
forfeiture as a result of Section 16(b) and the Section 83(b) election
generally would not be significant. Thus, in this context, the taxable event
for the exercise of a nonstatutory stock option that has been outstanding for
at least six months ordinarily will be the date of exercise. If a nonstatutory
stock option is exercised within six months after the date of the grant,
taxation ordinarily would be deferred until the date which is six months after
the date of grant, unless the Insider files an election pursuant to Section
83(b) of the Code to be taxed on the date of exercise.
The Company generally will be entitled to a deduction in the amount of an
optionee's ordinary income at the time such income is recognized by the
optionee upon the exercise of a nonstatutory stock option. Income and payroll
taxes are required to be withheld on the amount of ordinary income resulting
from the exercise of a nonstatutory stock option.
On April 8, 1996, the closing price of the Company's Common Stock as reported
on the New York Stock Exchange Composite Tape was $18.75 per share.
The Board of Directors recommends that stockholders vote FOR the proposed
Director Stock Plan.
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SELECTION OF AUDITORS (ITEM NO. 4)
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 1996, subject to ratification and approval by the
stockholders. KPMG Peat Marwick LLP acted in the same capacity during 1995. 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 1995 services will amount to approximately
$919,900, including $602,700 for the examination of financial statements and
issuance of reports in compliance with debt or other agreements relating to
annual audited financial statements and $317,200 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. 5)
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 at least a majority of the
shares of Common Stock, determined as if each holder of Series A Preferred
Stock, Series F Preferred Stock and Series T Preferred Stock had converted such
shares of preferred stock into Common Stock immediately prior to the Record
Date, present in person or represented by proxy at the meeting and entitled to
vote, voting together as a single class.
"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 37.7% of the votes
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. 5).
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STOCKHOLDER PROPOSAL RELATING TO POLITICAL CONTRIBUTIONS (ITEM NO. 6)
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 by the
Board of Directors, would require the affirmative vote of the holders of at
least a majority of the shares of Common Stock, determined as if each holder of
Series A Preferred Stock, Series F Preferred Stock and Series T Preferred Stock
had converted such shares of preferred stock into Common Stock immediately
prior to the Record Date, present in person or represented by proxy at the
meeting and entitled to vote, voting together as a single class.
"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.
Last year the owners of 4,962,028 shares, representing approximately 7.7%
of shares voting, voted FOR this proposal.
If you AGREE, please mark your proxy FOR this resolution."
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company believes that approval of the stockholder resolution would
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.
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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. 6).
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 1997 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 1997 annual meeting of stockholders, expected
to be held in late May 1997, must be received at the Company's principal
executive offices by January 23, 1997.
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, 1995, 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.
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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 in 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,
Michelle V. Bryan
Secretary
April 15, 1996
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EXHIBIT A
1996 STOCK INCENTIVE PLAN
OF
USAIR GROUP, INC.
1. Purpose. The purpose of this Stock Incentive Plan is to advance the
interests of the Corporation by encouraging the acquisition of a larger
personal proprietary interest in the Corporation by key employees of the
Corporation and of its Subsidiaries upon whose judgment and dedication the
Corporation is largely dependent for the successful conduct of its business. It
is anticipated that the acquisition of such proprietary interest in the
Corporation will stimulate the efforts of such key employees on behalf of the
Corporation and strengthen their desire to remain with the Corporation or its
Subsidiaries and that the opportunity to acquire such a proprietary interest
will enable the Corporation and its Subsidiaries to attract and retain
desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
(a) "Affiliate" shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Corporation.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Cause" shall mean an act or acts of personal dishonesty taken by
optionee and intended to result in substantial personal enrichment at the
expense of the Corporation or any of its Subsidiaries or the conviction of
optionee of a felony.
(d) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Corporation (the "Outstanding
Group Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Group Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (w) any acquisition directly from
the Corporation, (x) any acquisition by the Corporation or any of its
Subsidiaries, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any of its
Subsidiaries, or (z) any acquisition by any corporation with respect to
which, following such acquisition, more than 85% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Group Common Stock
and Outstanding Group Voting Securities immediately prior to such
acquisition, in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Group Common
Stock and Outstanding Group Voting Securities, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote
of at least a majority of the directors then
<PAGE>
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents; or
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Group Common
Stock and Outstanding Group Voting Securities immediately prior to such
reorganization, merger or consolidation do not following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 85% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Group Common
Stock and Outstanding Group Voting Securities, as the case may be; or
(iv) Approval by the shareholders of the Corporation of (x) a
complete liquidation or dissolution of the Corporation or (y) the sale
or other disposition of all or substantially all of the assets of the
Corporation, other than to a corporation, with respect to which
following such sale or other disposition, more than 85% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Group
Common Stock and Outstanding Group Voting Securities immediately prior
to such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Group Common Stock and Outstanding
Group Voting Securities, as the case may be; or
(v) The acquisition by an individual, entity or group of beneficial
ownership of 20% or more of the then outstanding securities of the
Corporation, including both voting and non-voting securities, provided,
however, that such acquisition shall only constitute a change of
control in the event that such individual, entity or group also obtains
the power to elect by class vote, cumulative voting or otherwise to
appoint 20% or more of the total number of directors to the Board.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Human Resources Committee of the Board or
such other committee as may be designated by the Board.
(g) "Corporation" shall mean USAir Group, Inc.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(i) "Fair Market Value" shall mean the average of the high and low sales
prices of the Shares as reported on the New York Stock Exchange Composite
Tape on the date as of which such value is being determined or, if there
shall be no sale on that date, then on the last previous day on which a
sale was reported, provided, however, that during the 60-day period from
and after a Change of Control, "Fair Market Value" shall mean, other than
in the case of Shares subject to incentive stock options, as defined in the
Code, the higher of (X) the highest reported sales price, regular way, of
Shares on the New York
A-2
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Stock Exchange Composite Tape during the 60-day period prior to the Change
of Control and (Y) if the Change of Control is the result of a transaction
or series of transactions described in paragraphs (i), (iii) or (iv) of the
definition of "Change of Control" herein, the highest price for Shares paid
in such transaction or series of transactions which in the case of such
paragraph (i) shall be the highest price for Shares as reflected in a
Schedule 13D filed under the Exchange Act by the person having made the
acquisition.
(j) "Options" shall mean the stock options issued pursuant to Section 5
hereof.
(k) "Plan" shall mean the 1996 Stock Incentive Plan of USAir Group, Inc.,
as such Plan may be amended from time to time.
(l) "Restricted Period" means the period selected by the Committee
pursuant to Section 6 hereof.
(m) "Restricted Stock" means Shares which have been awarded to a grantee
subject to the restrictions referred to in Section 6 hereof so long as such
restrictions are in effect.
(n) "Share" shall mean a share of common stock of the Corporation.
(o) "Subsidiary" shall mean any corporation more than 50% of whose stock
having general voting power is owned by the Corporation or by a Subsidiary
of the Corporation.
3. Administration. The Plan shall be administered by the Committee which,
unless otherwise determined by the Board, shall consist of not less than two
directors of the Corporation, each of whom shall qualify as a "disinterested
director" (within the meaning of Rule 16b-3 promulgated under Section 16(b) of
the Exchange Act) and as an "outside director" (within the meaning of Section
162(m)(4)(c) of the Code). No more than 3,100,000 Shares, which may be either
treasury Shares or authorized but unissued Shares, of the Corporation's common
stock in the aggregate, except to the extent of adjustments authorized by
Section 11 hereof, may be issued pursuant to Options and Restricted Stock
awards granted under this Plan. Any Shares subject to Options or Restricted
Stock awards may thereafter be subject to new grants under this Plan if there
is a lapse, expiration or termination of any such Options or Restricted Stock
awards prior to issuance of the Shares or if Shares are issued hereunder and
thereafter reacquired by the Corporation pursuant to rights reserved by the
Corporation in connection with the issuance thereof. No individual may be
granted Options or Restricted Stock awards with respect to more than an
aggregate of 1,650,000 Shares in any one calendar year.
The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
determine advisable to make the Plan, Options and Restricted Stock effective or
provide for their administration, and may take such other action with regard to
the Plan, Options and Restricted Stock as it shall deem desirable to effectuate
their purpose. The Committee may require that any Options granted be
exercisable in installments. A determination of the Committee as to any
questions which may arise with respect to the interpretation of the provisions
of the Plan, Options and Restricted Stock shall be final.
This Plan shall constitute an amendment and restatement of the Corporation's
1988 Stock Incentive Plan with respect to the Shares reserved thereunder for
which awards had not yet been granted thereunder as of the date of adoption of
this Plan by the Board (or which again become available upon the lapse,
expiration or termination of any award previously made thereunder). Options and
other awards with respect to such Shares may be granted hereunder by the
Committee in accordance with the terms of this Plan.
A-3
<PAGE>
4. Participants. Options and Restricted Stock may be granted under the Plan
to any key employee of the Corporation or any Subsidiary or to any individual
in contemplation of becoming a key employee of the Corporation or any
Subsidiary. The individuals to whom Options and Restricted Stock are to be
offered under the Plan and the number of Shares to be optioned and Restricted
Stock to be issued to each such individual shall be determined by the Committee
in its sole discretion, subject, however, to the terms and conditions of the
Plan.
5. Options. The number of Shares to be optioned to any eligible person shall
be determined by the Committee in its sole discretion. The Committee shall be
entitled to issue Options at different times to the same person. Options shall
be subject to such terms and conditions and evidenced by agreements in such
form as shall be determined from time to time by the Chief Executive Officer,
provided that the terms and conditions of each such agreement are not
inconsistent with this Plan.
The purchase price per Share for the Shares to be purchased pursuant to the
exercise of any Option shall be fixed by the Committee, but shall not be less
than 100% of the Fair Market Value of the Shares on the date such Option is
granted; provided, however, for purposes of any grant of Options by the
Committee the meaning of Fair Market Value shall be as defined in Section 2(i)
hereof without regard to the proviso in such definition. No Option granted
under the Plan shall be exercisable after ten years and one month from the date
it was granted or such earlier date as shall be established by the Committee in
granting the Option.
Except as otherwise provided herein, an Option shall be exercisable by the
holder at such rate and times as may be fixed by the Committee, but not sooner
than approval of the Plan by the stockholders of the Corporation; provided,
however, upon a Change of Control, all Options shall become immediately
exercisable. The Committee may provide that the Option shall not be
exercisable, in whole or in part, except upon the fulfillment of specific
defined conditions. No Option may at any time be exercised in part with respect
to fewer than 100 Shares unless fewer than 100 Shares remain in the Option
grant being exercised.
Options shall be exercised by written notice to the Secretary of the
Corporation (or the Secretary's designated agent) in such form as is from time
to time prescribed by the Committee and by the payment in full of the aggregate
exercised price of the Options being exercised. Payment of the purchase price
upon exercise of any Option shall be made (A) in cash or (B) in whole or in
part, (i) in Shares valued at Fair Market Value on the date of exercise or (ii)
with respect to the exercise of Options which are not incentive stock options,
as defined in Section 422 of the Code, by electing to have the Corporation
withhold a number of shares of common stock otherwise receivable upon exercise,
the value of such withheld shares determined by the Fair Market Value on the
date of exercise; provided, however, that during the 60-day period from and
after a Change of Control all optionees with respect to any or all of their
respective Options shall, unless the Committee shall determine otherwise at the
time of grant, have the right, in lieu of the payment of the full option price
of the Shares being purchased under the Options and by giving written notice to
the Corporation in form satisfactory to the Committee, to elect (within such
60-day period) to surrender all or part of the Options to the Corporation and
to receive in cash an amount equal to the amount by which the Fair Market Value
of Shares on the date of exercise exceeds the option price per Share under the
Options multiplied by the number of Shares granted under the Options as to
which the right granted by this proviso shall have been exercised. Such written
notice shall specify the optionee's election to purchase Shares granted under
the Options or to receive the cash payment referred to in the proviso to the
immediately preceding sentence.
6. Restricted Stock. Subject to the terms of the Plan, the Committee shall
determine and designate the recipients of Restricted Stock awards, the dates on
which such awards are to be granted, the number of
A-4
<PAGE>
Shares subject to such awards, and the restrictions applicable to such awards.
Restricted Stock awards shall be subject to such terms and conditions and
evidenced by agreements in such form as shall be determined from time to time
by the Chief Executive Officer, provided that the terms and conditions of each
such agreement are not inconsistent with this Plan.
7. Nontransferability of Options and Restricted Stock. Options and Restricted
Stock shall not be transferable by the holder thereof otherwise than by will or
the laws of descent and distribution to the extent provided herein, and Options
may be exercised during the holder's lifetime only by the holder thereof.
8. Tax Withholding. If as a result of: (a) the exercise of any Options or the
disposition of any Shares acquired pursuant to such exercise, or (b) the lapse
of any restrictions on the disposition of Restricted Stock, the Corporation or
Subsidiary shall be required to withhold any amounts by reason of any Federal,
state or local tax rules or regulations, the Corporation or Subsidiary shall be
entitled to deduct and withhold such amounts from any cash payments to be made
to the holder. In any event, the holder shall make available to the Corporation
or Subsidiary, promptly when required, sufficient funds to meet the requirement
for such withholding; and the Committee shall be entitled to take and authorize
such steps as it may deem advisable in order to have such funds available to
the Corporation or Subsidiary when required. Notwithstanding the foregoing, the
holder shall have the right to satisfy such withholding, in whole or in part,
in Shares (including by having the Corporation withhold Shares otherwise
issuable in respect of such Options or Restricted Stock) valued at Fair Market
Value on the date of exercise or lapse of restrictions, as applicable.
9. Tax Liability. Subject to the Committee's discretion, agreements between
the Corporation and grantees in connection with awards of Options or Restricted
Stock may provide for the payment by the Corporation of a supplemental cash
payment to grantees promptly after the exercise of an Option, or promptly after
the date on which the shares of Restricted Stock awarded are included in the
gross income of the grantee under the Code. Such supplemental cash payments, to
the extent determined by the Committee, shall provide for the payment of such
amounts as may be necessary to result in the grantee not having any incremental
tax liability as a result of such exercise or inclusion in grantee's gross
income. The determination of the amount of any supplemental cash payments by
the Committee shall be conclusive.
10. Termination of Employment. Notwithstanding any provision of the Plan to
the contrary, (i) upon the termination of employment of an optionee with the
Corporation and all Subsidiaries other than for Cause, the optionee (or the
optionee's estate in the event of the optionee's death) shall have the
privilege of exercising any unexercised Options which the optionee could have
exercised at the time of such termination of employment at any time until the
end of six months following such termination of employment and (ii) upon the
termination of employment of an optionee with the Corporation and all
Subsidiaries for Cause, all unexercised Options of such optionee shall
terminate ten days after such termination of employment.
The Committee may permit individual exceptions to the requirements of this
section by extending the period in which Options may be exercised, provided,
however, that no Options may be extended past the earlier to occur of (i) their
expiration date or (ii) three years following termination of employment.
11. Adjustment of Optioned Shares. If prior to the complete exercise of any
Option there shall be declared and paid a stock dividend upon the Shares of the
Corporation or if the Shares shall be split-up, converted, reclassified, or
changed into, or exchanged for, a different number or kind of securities of the
Corporation, the Option, to the extent that it has not been exercised, shall
entitle the holder upon the future exercise of such Option to such number and
kind of securities or other property subject to the terms of the Option to
which he would be entitled had he actually owned the Shares subject to the
unexercised portion of the Option at the time of the occurrence of such stock
dividend, split-up, conversion, reclassification, change
A-5
<PAGE>
or exchange; and the aggregate purchase price upon the future exercise of the
Option shall be the same as if originally optioned Shares were being purchased
thereunder. If any such event should occur, the number of Shares with respect
to which Options remain to be issued, or with respect to which Options may be
reissued, shall be similarly adjusted.
In the event the outstanding Shares shall be changed into or exchanged for
any other class or series of capital stock or cash, securities or other
property pursuant to a recapitalization, reclassification, merger,
consolidation, combination or similar transaction, then each Option shall
thereafter become exercisable for the number and/or kind of capital stock,
and/or the amount of cash, securities or other property so distributed, into
which the Shares subject to the Option would have been changed or exchanged had
the Option been exercised in full prior to such transaction, provided that, if
the kind or amount of capital stock or cash, securities or other property
received in such transaction is not the same for each outstanding Share, then
the kind or amount of capital stock or cash, securities or other property for
which the Option shall thereafter become exercisable shall be the kind and
amount so receivable per Share by a plurality of the Shares, and provided
further that, if necessary, the provisions of the Option shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of capital stock, cash, securities or other property thereafter issuable or
deliverable upon exercise of the Option.
12. Issuance of Shares and Compliance With Securities Act. The Corporation
may postpone the issuance and delivery of Shares upon any exercise of an
Option, or upon any lapsing of restriction on any shares of Restricted Stock
until (a) the admission of such Shares to listing on any stock exchange on
which Shares are then listed and (b) the completion of such registration or
other qualification of such Shares under any state or Federal law, rule or
regulation as the Corporation shall determine to be necessary or advisable. Any
person exercising an Option and any grantee of Restricted Stock shall make such
representations and furnish such information as may, in the opinion of counsel
for the Corporation, be appropriate to permit the Corporation, in light of the
then existence or nonexistence with respect to such Shares of an effective
registration statement under the Securities Act of 1933, as from time to time
amended, to issue the Shares in compliance with the provisions of that or any
comparable act.
13. Amendment of the Plan. The Committee may at any time discontinue the Plan
or the grant of any additional Options or Restricted Stock under the Plan.
Except as hereinafter provided, the Committee may from time to time amend the
Plan and the terms and conditions of any Options or Restricted Stock not
theretofore issued, and the Committee, with the consent of the affected holder
of an Option or Restricted Stock may at any time withdraw or from time to time
amend the Plan and the terms and conditions of such Option or Restricted Stock
as have been theretofore granted.
14. Effectiveness and Term of the Plan. The Plan shall become effective and
in full force and effect upon its approval by the holders of a majority of the
Shares present or represented and entitled to vote at the 1996 annual meeting
of the stockholders of the Corporation and, unless sooner terminated by the
Committee pursuant to Section 13 hereof, the Plan shall terminate on the date
ten years after such approval. No Option or Restricted Stock may be granted or
awarded after termination of the Plan. Termination of the Plan shall not affect
the validity of any Option or Restricted Stock outstanding on the date of such
termination.
A-6
<PAGE>
EXHIBIT B
USAIR GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
1. PURPOSE
1.1 The USAir Group, Inc. Nonemployee Director Stock Incentive Plan is
intended to increase the alignment of the interest of eligible members of the
Board with the interests of stockholders of the Corporation by providing
further opportunity for ownership of Stock, and to increase their incentive to
contribute to the success of the Corporation's business through the grant of
Options.
1.2 The Plan is intended to comply with Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time, and shall be construed to so
comply.
2. DEFINITIONS. When used in this Plan, unless the context otherwise requires:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Corporation (the "Outstanding
Group Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Group Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (w) any acquisition directly from
the Corporation, (x) any acquisition by the Corporation or any of its
Subsidiaries, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any of its
Subsidiaries, or (z) any acquisition by any corporation with respect to
which, following such acquisition, more than 85% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Group Common Stock
and Outstanding Group Voting Securities immediately prior to such
acquisition, in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Group Common
Stock and Outstanding Group Voting Securities, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents; or
<PAGE>
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Group Common
Stock and Outstanding Group Voting Securities immediately prior to such
reorganization, merger or consolidation do not following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 85% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Group Common
Stock and Outstanding Group Voting Securities, as the case may be; or
(iv) Approval by the shareholders of the Corporation of (x) a
complete liquidation or dissolution of the Corporation or (y) the sale
or other disposition of all or substantially all of the assets of the
Corporation, other than to a corporation, with respect to which
following such sale or other disposition, more than 85% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Group
Common Stock and Outstanding Group Voting Securities immediately prior
to such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Group Common Stock and Outstanding
Group Voting Securities, as the case may be; or
(v) The acquisition by an individual, entity or group of beneficial
ownership of 20% or more of the then outstanding securities of the
Corporation, including both voting and non-voting securities, provided,
however, that such acquisition shall only constitute a change of
control in the event that such individual, entity or group also obtains
the power to elect by class vote, cumulative voting or otherwise to
appoint 20% or more of the total number of directors to the Board.
(c) "Committee" shall mean the Human Resources Committee of the Board or
such other committee as may be designated by the Board.
(d) "Corporation" shall mean USAir Group, Inc.
(e) "Date of Grant" shall mean the date on which Options are granted
pursuant to Section 5.1.
(f) "Eligible Director" shall mean each member of the Board who (i) is
not at the time of reference an employee of the Corporation or any
Subsidiary, (ii) is not serving on the Board pursuant to rights exercised
by a preferred stockholder of the Corporation, and (iii) in the case of an
individual first becoming a member of the Board after January 1, 1996, was
not previously an employee of the Corporation or any Subsidiary.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(h) "Fair Market Value" shall mean the average of the high and low sales
prices of the Stock as reported on the New York Stock Exchange Composite
Tape on the date as of which such value is being determined or, if there
shall be no sale on that date, then on the last previous day on which a
sale was reported.
(i) "Options" shall mean the stock options issued pursuant to Section 5
hereof.
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<PAGE>
(j) "Plan" shall mean the USAir Group, Inc. Nonemployee Director Stock
Incentive Plan, as such Plan may be amended from time to time.
(k) "Stock" shall mean the common stock of the Corporation.
(l) "Subsidiary" shall mean any corporation more than 50% of whose stock
having general voting power is owned by the Corporation or by a Subsidiary
of the Corporation.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee.
3.2 The Committee may make such rules and establish such procedures for the
administration of the Plan as it deems appropriate to carry out the purpose of
the Plan, provided that the Committee shall have no discretion with respect to
the grantee, amount, price or timing of any Option grant. The interpretation
and application of the Plan or of any rule or procedure, and any other matter
relating to or necessary to the administration of the Plan, shall be determined
by the Committee, and any such determination shall be final and binding on all
persons. Options shall be evidenced by agreements in such form as shall be
determined from time to time by the Committee, provided that the terms and
conditions of each such agreement are not inconsistent with this Plan.
4. SHARES OF STOCK
4.1 Shares Reserved. Subject to adjustment as provided in Section 4.2 hereof,
a maximum of 70,000 shares of Stock shall be reserved for issuance in
accordance with the terms of the Plan. Shares of Stock that may be issued upon
the exercise of Options under the Plan may either be authorized and unissued
shares or issued shares that have been reacquired by the Corporation. If an
Option under the Plan is surrendered, expires, lapses or ceases to be
exercisable in whole or in part for any other reason, then the shares that were
subject to any such Option shall again be available for grant under the Plan.
4.2 Capital Adjustments. In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation or a
similar corporate transaction, the maximum number or class of shares available
under the Plan, the number or class of shares of Stock to be delivered
hereunder upon the exercise of Options granted hereunder, and the price at
which Options may be exercised, as appropriate, shall be proportionately
adjusted to reflect any such transaction.
5. GRANT OF OPTIONS
5.1 Annual Grant. On the first business day following the 1996 annual meeting
of stockholders of the Corporation, each Eligible Director shall automatically
be issued an Option pursuant to the Plan to purchase 1,500 shares of Stock.
Thereafter, on the first business day following the annual meeting of
stockholders of the Corporation held in each year subsequent to 1996 and prior
to the termination of the Plan, each Eligible Director shall automatically be
issued an Option pursuant to the Plan to purchase 1,500 shares of Stock.
Options shall be granted at an option price equal to the Fair Market Value of
Stock on the Date of Grant.
5.2 Terms and Conditions of Options.
(a) Each Option shall first become exercisable on the earliest to occur
of (i) the first anniversary of the Date of Grant, (ii) the Eligible
Director's death, disability or termination of service as a director upon
completion of the last term of office to which such director was elected,
or (iii) upon the occurrence
B-3
<PAGE>
of a Change of Control. If an Eligible Director otherwise terminates
service as a director, any Options that have not become exercisable shall
be forfeited as of the date of such termination of service. Subject to the
foregoing and Section 5.2(c) below, each Option shall expire on the date
that is ten years following the Date of Grant.
(b) Options shall be exercised by written notice to the Secretary of the
Corporation in such form as is from time to time prescribed by the
Committee and by the payment in full, in cash, of the aggregate option
price of the shares of Stock for which the Option is being exercised. To
the extent that an Option is not exercised by an optionee when it becomes
initially exercisable, it shall not expire but shall be carried forward and
shall be exercisable until the expiration date. Partial exercise shall be
permitted from time to time, provided that exercises shall be in multiples
of one hundred shares of Stock.
(c) If for any reason during the term of an unexercised and unexpired
Option, the Eligible Director shall cease to be a member of the Board, such
Option may be exercised, to the extent exercisable at the time of such
termination of service, by the Eligible Director (or, in the event of his
death, by his estate) until the second anniversary of the date that the
Eligible Director ceases to be a member of the Board.
6. EFFECTIVE DATE; STOCKHOLDER APPROVAL; TERM OF PLAN
6.1 The Plan is subject to approval by the stockholders of the Corporation at
the 1996 annual meeting and shall be effective on the date of such approval.
6.2 The Plan shall remain in effect until all Options granted under the Plan
have been satisfied by the issuance of shares, or terminated under the terms of
the Plan, provided that no Options may be granted after the tenth anniversary
of the effective date of the Plan.
7. AMENDMENT; TERMINATION
7.1 The Board may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided, however, that the provisions
of Section 5 shall not be amended more than every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
The termination or any modification or amendment of the Plan shall not, without
the consent of a director, affect his or her rights under a grant of an Option.
8. MISCELLANEOUS
8.1 Options granted hereunder shall not be assignable or transferable by the
director except by will or by the laws of descent and distribution. During the
life of the director, an Option shall be exercisable only by the director.
8.2 Each Option shall be subject to the requirement that, if at any time the
Committee shall determine that the listing, registration or qualification of
the shares subject to such Option upon any securities exchange or under any
state or federal law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such shares shall not be delivered
unless such listing, registration, qualification, consent, approval or other
action shall have been effected or obtained free of any conditions not
acceptable to the Committee. The Corporation may require that certificates
evidencing shares of Stock delivered pursuant to any award made hereunder bear
a legend indicating that the sale, transfer or other disposition thereof by the
holder is prohibited except in compliance with the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
B-4
<PAGE>
8.3 Nothing in the Plan shall be construed as conferring any right upon any
director to continue as a member of the Board.
8.4 The Plan and all rights hereunder shall be construed in accordance with
and governed by the laws of the State of Delaware.
8.5 The Corporation shall have the right to require, prior to the issuance or
delivery of any shares of Stock hereunder, payment by the holder of such award
of any federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award. The holder may satisfy any such
obligation by any of the following means: (A) a cash payment to the
Corporation, (B) delivery to the Corporation of shares of Stock having an
aggregate Fair Market Value, determined as of the date the obligation to
withhold or pay taxes arises in connection with an award (the "Tax Date"),
equal to the amount necessary to satisfy any such obligation, (C) authorizing
the Corporation to withhold whole shares of Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the Tax Date
equal to the amount necessary to satisfy any such obligation, (D) a cash
payment by a broker-dealer acceptable to the Corporation to whom the optionee
has submitted an irrevocable notice of exercise, or (E) any combination of the
foregoing. The Eligible Director may elect to have shares of Stock delivered or
withheld having an aggregate Fair Market Value in excess of the minimum amount
required to be withheld, but not in excess of the amount determined by applying
the holder's maximum marginal tax rate. Any fraction of a share of Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.
B-5
<PAGE>
USAIR GROUP, INC.
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS
ON MAY 22, 1996
The undersigned hereby appoints M.V. Bryan, J.W. Harper and L.M. Nagin, and
each of them proxies (each with power of substitution) of the undersigned to
attend the above annual meeting of stockholders of USAir Group, Inc. and any
adjournment thereof and thereat to vote all shares of stock held by the
undersigned, as specified on the reverse side, and on any other matters that
may properly come before said meeting.
For those participants who may hold shares in the USAir, Inc. Employee Stock
Ownership Plan (the "ESOP") or the USAir, Inc. Employee Savings Plan, the
USAir, Inc. 401(k) Savings Plan or the Supplemental Retirement Plan of
Piedmont Aviation, Inc. (collectively, the "Plans"), please fill in and sign
this card and mail it in time to be received no later than May 16, 1996, in
order to be voted in a timely manner by the Trustee of the ESOP, State Street
Bank and Trust Company (the "ESOP Trustee"), and the administrator of the
Plans, Fidelity Management Trust Company (the "Administrator"). After May 16,
1996 the instructions cannot be revoked and, in accordance with the ESOP and
the Plans, you may not vote these shares in person at the Meeting. The Trustee
is authorized to vote the ESOP shares and the Administrator is authorized to
vote the Plan shares for which instructions have been given upon such other
business as may come before the meeting. Chemical Mellon Shareholder Services,
L.L.C. will tally the vote on behalf of the Trustee and the Administrator.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
Comments:
See Reverse Side
<PAGE>
<TABLE>
<CAPTION>
Please mark
your votes as [X]
indicated in
this example
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1-4 AND AGAINST ITEMS 5 AND 6
<S> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS TO WITHHOLD 2. Approval of 1996 [ ] [ ] [ ]
FOR all nominees AUTHORITY Stock Incentive Plan.
(Except as marked (For all Nominees FOR AGAINST ABSTAIN
to the contrary*) listed) 3. Approval of Non-Employee [ ] [ ] [ ]
Director Stock Incentive Plan.
FOR AGAINST ABSTAIN
4. Approval of the selection of [ ] [ ] [ ]
KPMG Peat Marwick LLP as
auditors.
FOR AGAINST ABSTAIN
5. Stockholder proposal [ ] [ ] [ ]
concerning confidential voting.
FOR AGAINST ABSTAIN
6. Stockholder proposal relating [ ] [ ] [ ]
to political contributions.
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NOMINEES: Will attend meeting [ ]
R.J. Ayling, R.W. Bogle, E.I. Colodny, M.J.
DeVito, R. Gangwal, G.J.W. Goodman, J.W. Harris, I have noted comments [ ]
E.A. Horrigan, Jr., R. LeBuhn, R.P. Maynard, on reverse side
J.G. Medlin, Jr., H.M. Merriman, R.W. Smith, D.M. Stevens,
S.M. Wolf. Change of Address [ ]
*INSTRUCTION: -------------------------------
To withhold authority to vote for any individual nominee,
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strike a line through the nominee's name above. --------------------------------
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THIS PROXY WILL BE VOTED FOR ITEMS 1-4 AND AGAINST ITEMS 5 AND 6 IF NO CHOICE
IS SPECIFIED.
Signature(s) ____________________________ Date ______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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* FOLD AND DETACH HERE *
RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING
