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
US AIRWAYS GROUP, INC.
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(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:
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
WASHINGTON, D.C.
----------------
March 31, 1998
To the Stockholders of
US Airways Group, Inc.
The 1998 annual meeting of stockholders of US Airways Group, Inc. (the
"Company") will be held at the Capitol Hilton Hotel, 16th and K Streets, N.W.,
Washington, D.C. on May 20, 1998 at 9:30 a.m. local time, to consider and act
on the following matters:
1. The election of 11 directors to hold office for one year or until
their successors are elected and qualified (Item No. 1).
2. Ratification of the selection of auditors of the Company for fiscal
year 1998 (Item No. 2).
3. Approval of an amendment to the Company's 1996 Stock Incentive Plan to
make available for grant an additional 2,000,000 shares of Common Stock
(Item No. 3).
4. Consideration of two stockholder proposals as described in the
accompanying Proxy Statement (Item Nos. 4 and 5).
5. The transaction of such other business as may properly come before the
meeting.
Eligible stockholders of record at the close of business on March 25, 1998
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.
US AIRWAYS GROUP, INC.
2345 CRYSTAL DRIVE
ARLINGTON, VIRGINIA 22227
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors") of US Airways Group, Inc. (the
"Company") of proxies to be voted at the annual meeting of stockholders in
Washington, D.C. on May 20, 1998. Enclosed with this Proxy Statement is a
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 March 31, 1998.
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 at the close of business on March 25, 1998 (the
"Record Date") are entitled to vote at the meeting. On March 25, 1998 the
Company had outstanding 101,047,819 shares of Common Stock. Each share of
Common Stock is entitled to one vote, except as set forth below. From time to
time, the voting power of the Common Stock may be limited by then applicable
U.S. statutory and U.S. Department of Transportation 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
any Common Stock and the Company expects that the holders thereof will be
entitled to their full voting power at the annual meeting.
REQUIRED VOTES
The vote of the holders of a plurality of the votes cast by holders of
shares of Common Stock 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
present in person or represented by proxy at the meeting and entitled to vote
is required (i) to ratify the Board of Directors' appointment of KPMG Peat
Marwick LLP as the Company's
independent public accountants for 1998 (Item No. 2), (ii) to approve the
increase in the number of shares of Common Stock available under the Company's
1996 Stock Incentive Plan (Item No. 3), and (iii) to approve each of the
stockholder proposals (Items Nos. 4 and 5). Therefore, abstentions as to these
particular proposals will have the same effect as votes against such
proposals. With respect to Items No. 2 and No. 3, broker non-votes will be
treated as votes against the proposal. With respect to Items No. 4 and 5,
however, broker non-votes will be deemed shares of stock not entitled to vote
on such proposals and 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 beneficially owned by all
directors, nominees for director and executive officers of the Company (or its
principal operating subsidiary US Airways, Inc. ("US Airways")) as of January
31, 1998. 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).
NUMBER OF PERCENT OF
OWNER SHARES CLASS(1)
----- --------- ----------
DIRECTORS AND NOMINEES FOR DIRECTOR
Mathias J. DeVito............................ 2,200(2)
Rakesh Gangwal............................... 810,000(3)
George J. W. Goodman......................... 1,998(2)
John W. Harris............................... 2,500(2)(4)
Edward A. Horrigan, Jr....................... 2,000(2)
Robert L. Johnson............................ 0
Robert LeBuhn................................ 9,500(2)
John G. Medlin, Jr........................... 3,500(2)
Hanne M. Merriman............................ 3,000(2)
Raymond W. Smith............................. 2,000(2)
Stephen M. Wolf.............................. 1,555,000(5) 1.7%
EXECUTIVE OFFICERS
John W. Harper............................... 10,888(6)
John R. Long III............................. 98,052(7)
Lawrence M. Nagin............................ 194,000(8)
16 directors, nominees for director and execu-
tive officers of the Company as a group........ 2,741,732(9) 3.0%
- --------
(1) Percentages are shown only where they exceed one percent of the number of
shares outstanding and are based on shares of Common Stock outstanding on
January 31, 1998.
(2) These holdings include 1,500 shares of Common Stock issuable within 60
days of January 31, 1998 upon exercise of stock options.
(3) The listing of Mr. Gangwal's holding includes 237,450 shares of Common
Stock which are subject to certain restrictions ("Restricted Stock") and
510,000 shares of Common Stock issuable within 60 days of January 31,
1998 upon exercise of stock options.
(4) The listing of Mr. Harris' holding includes 600 shares of Common Stock
for which he has shared voting and dispositive power.
(5) The listing of Mr. Wolf's holding includes 271,121 shares of Restricted
Stock and 1,150,000 shares of Common Stock issuable within 60 days of
January 31, 1998 upon exercise of stock options.
(6) The listing of Mr. Harper's holding includes 7,000 shares of Common Stock
issuable within 60 days of January 31, 1998 upon exercise of stock
options.
(7) The listing of Mr. Long's holding includes 69,000 shares of Common Stock
issuable within 60 days of January 31, 1998 upon exercise of stock
options and 7,000 shares of Restricted Stock.
(8) The listing of Mr. Nagin's holding includes 37,831 shares of Restricted
Stock and 144,000 shares of Common Stock issuable within 60 days of
January 31, 1998 upon exercise of stock options.
(9) The listing of all directors', nominees' and officers' holdings includes
1,909,000 shares of Common Stock issuable within 60 days of January 31,
1998 upon exercise of stock options and 569,402 shares of Restricted
Stock.
2
Set forth below are the number of options and units of phantom stock of the
Company ("Deferred Stock Units") held by each director and nominee for
director pursuant to the director compensation programs. See "Compensation of
Directors" below. 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.
NUMBER OF NUMBER OF DIRECTOR
OWNER DEFERRED STOCK UNITS STOCK OPTIONS(1)
----- -------------------- ------------------
DIRECTORS AND NOMINEES FOR DIRECTOR
Mathias J. DeVito................ 9,069.29 3,000
Rakesh Gangwal................... -0- -0-
George J. W. Goodman............. 9,069.29 3,000
John W. Harris................... 2,325.49 3,000
Edward A. Horrigan, Jr........... 9,640.53 3,000
Robert L. Johnson................ -0- -0-
Robert LeBuhn.................... 8,111.38 3,000
John G. Medlin, Jr............... 8,185.42 3,000
Hanne M. Merriman................ 5,239.13 3,000
Raymond W. Smith................. 3,695.78 3,000
Stephen M. Wolf.................. -0- -0-
- --------
(1) The holding for each director (other than Messrs. Gangwal, Johnson and
Wolf) includes 1,500 shares of Common Stock issuable within 60 days of
January 31, 1998 upon the exercise of stock options. These options are
also reflected in the Beneficial Security Ownership table on page 2.
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 March 25, 1998, more than 5% of its Common Stock
are listed below:
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
-------------- ------------------- ----------------------- --------
Common Stock Morgan Stanley 5,077,283(2) 5.0%
Dean Witter
Discover & Co.
1585 Broadway
New York, New
York 10036
Common Stock Berkshire 9,239,938(3) 9.1%
Hathaway, Inc.
1440 Kiewit
Plaza
Omaha, Nebraska
68131
Common Stock Tiger Management 16,334,900(4) 16.2%
LLC
Tiger
Performance LLC
101 Park Avenue
New York, New
York 10178
- --------
(1) Represents percent of class of stock outstanding on March 25, 1998.
(2) As set forth in a Schedule 13G, dated February 12, 1998, as of December
31, 1997.
(3) Based upon the conversion of US Airways Group, Inc. Series H Senior
Cumulative Convertible Preferred Stock into Common Stock on March 12,
1998.
(4) As set forth in a Schedule 13G, dated February 13, 1998, as of December
31, 1997.
ELECTION OF DIRECTORS (ITEM NO. 1)
Pursuant to the by-laws of the Company, the Board of Directors shall consist
of 11 members. Each of the nominees listed below is currently a director of
the Company. Each of the nominees listed below other than Robert L. Johnson,
was elected in 1997 by the stockholders of the Company. Mr. Johnson was
elected by the Board of Directors in January, 1998. Each director of the
Company is also a director of the Company's principal operating subsidiary, US
Airways. Directors will be elected to hold office for one year or until the
election and
3
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.
SERVED AS
DIRECTOR
SINCE
---------
Mathias J. DeVito, 67... Mr. DeVito is Chairman Emeritus of the Board and 1981
Chairman of the Executive Committee of The Rouse
Company (real estate development and manage-
ment). He also serves as a Director of First
Maryland Bancorp and subsidiaries of The Rouse
Company. He is a member of the Board of the
Maryland Institute, College of Art, the 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 Executive and Nomi-
nating Committees of the Board of
Directors.
Rakesh Gangwal, 44...... Mr. Gangwal became President and Chief Operating 1996
Officer of the Company and US Airways on Febru-
ary 19, 1996. Prior thereto, Mr. Gangwal had
served as Executive Vice President--Planning and
Development of Air France since November 1994.
Mr. Gangwal previously served in a variety of
management roles at United Air Lines over an
eleven-year period, culminating in the role of
Senior Vice President--Planning.
George J. W. Goodman,
67..................... Mr. Goodman is President of Continental Fideli- 1978
ty, Inc., which provides editorial and invest-
ment services. He is the author of a number of
books and articles on finance and economics un-
der the pen name "Adam Smith" and is the host of
a television series of that name seen on public
broadcasting stations in the U.S. and on other
networks abroad. He is a Director of Cambrex
Corporation and of New England Life. Mr. Goodman
also serves as a member of the Advisory Commit-
tee of the Center for International Relations at
Princeton University, and is a Life Trustee of
the Urban Institute. He is a member of the Human
Resources and Safety Committees of the Board of
Directors.
John W. Harris, 50...... 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 Piedmont Natural Gas and Virginia Power Com-
panies. Mr. Harris is former Chairman of the
Greater Charlotte Chamber of Commerce, former
Chairman of the Board of Trustees of the Univer-
sity of North Carolina and he serves on the
boards of several community service organiza-
tions. He is Chairman of the Safety Committee
and a member of the Human Resources Committees
of the Board of Directors.
4
SERVED AS
DIRECTOR
SINCE
---------
Edward A. Horrigan, Jr.,
68..................... Mr. Horrigan is the retired Vice Chairman of the 1987
Board of RJR Nabisco, Inc. and retired Chairman
and Chief Executive Officer of R. J. Reynolds
Tobacco Company, Winston-Salem, North Carolina
(consumer products). He is also the former
Chairman and CEO of Liggett Group (consumer
products). He is a Director of The Haggai Foun-
dation. Mr. Horrigan is a member of the Audit
and Safety Committees of the Board of Directors.
Robert L. Johnson, 51... Mr. Johnson is the Chairman and Chief Executive 1998
Officer of BET Holdings, Inc. (media-entertain-
ment holding company). Mr. Johnson also serves
as a Director of the Hilton Hotels Corporation,
The United Negro College Fund, the National Ca-
ble Television Association--Academy of Cable
Programming, the American Film Institute, and
the Advertising Council. He is a member of the
Audit and Nominating Committees of the Board of
Directors.
Robert LeBuhn, 65....... 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 Insur-
ance Companies, Cambrex Corporation and Enzon,
Inc. He is Trustee and President of the Geral-
dine R. Dodge Foundation, Morristown, New Jersey
and is a member of the New York Society of Secu-
rity Analysts. He is a member of the Audit, Ex-
ecutive and Nominating Committees of the Board
of Directors.
John G. Medlin, Jr., 64. 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 serves as Chairman of the Commission
for the Future of Justice and Courts in North
Carolina, as a trustee of The Duke Endowment,
the Kenan Institute for the Arts, the National
Humanities Center, Wake Forest University and
the Winston-Salem Foundation. Mr. Medlin also
serves as a Director of Wake Forest University
Baptist Hospital Medical Center, BellSouth Cor-
poration, Burlington Industries, Inc., Media
General, Inc., National Service Industries,
Inc., RJR Nabisco Holdings Corp. and Nabisco
Holdings Corp. He is Chairman of the Nominating
Committee and a member of the Executive and Hu-
man Resources Committees of the Board of Direc-
tors.
Hanne M. Merriman, 56... Mrs. Merriman is the Principal in Hanne Merriman 1985
Associates (retail business consultants). Mrs.
Merriman is a Director of Ameren Corporation,
Central Illinois Public
5
SERVED AS
DIRECTOR
SINCE
---------
Service Company, State Farm Mutual Automobile
Insurance Company, The Rouse Company, Ann Taylor
Stores Corporation, T. Rowe Price Mutual Funds,
and Finlay Enterprises, Inc. She is a member of
the National Women's Forum and a Trustee of The
American-Scandinavian Foundation. She was a mem-
ber of the Board of Directors of the Federal Re-
serve Bank of Richmond, Virginia from 1984-1990
and served as Chairman in 1989-1990. Mrs. Merri-
man is Chairman of the Audit Committee and is a
member of the Executive and Safety Committees of
the Board of Directors.
Raymond W. Smith, 60.... Mr. Smith is Chairman of the Board and Chief Ex- 1990
ecutive Officer of Bell Atlantic Corporation,
which is engaged principally in the telecommuni-
cations business and is one of the seven re-
gional companies formed as a result of the di-
vestiture of the Bell System. Previously, Mr.
Smith had served as Vice Chairman and President
of Bell Atlantic and Chairman of The Bell Tele-
phone Company of Pennsylvania. He is a member of
the Board of Directors of First Union Corpora-
tion, CBS Corporation, a trustee of the Carnegie
Mellon University and is active in many civic
and cultural organizations. He is a member of
the Human Resources and Nominating Committees of
the Board of Directors.
Stephen M. Wolf, 56..... Mr. Wolf is Chairman of the Board of Directors 1996
and Chief Executive Officer of the Company and
US Airways and was elected to those positions in
January 1996. Immediately prior to joining US
Airways, Mr. Wolf was a senior advisor to the
investment bank Lazard Freres & Co. Mr. Wolf was
Chairman and Chief Executive Officer of UAL Cor-
poration and United Air Lines, Inc. from Decem-
ber 1987 until July 1994. Mr. Wolf is a Director
of Philip Morris Companies, R.R. Donnelley &
Sons Co., The Brookings Institution, Georgetown
University and the Alzheimer's Disease and Re-
lated Disorders Association. Mr. Wolf is also
Chairman of the Executive Committee.
6
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held 18 meetings in 1997. The Board of
Directors has established the following standing committees: Audit Committee,
Executive Committee, Human Resources Committee, Nominating Committee and
Safety Committee. During 1997, the Audit Committee held seven meetings, the
Executive Committee held two meetings, the Human Resources Committee held
eight meetings, the Nominating Committee held three meetings, and the Safety
Committee held two meetings.
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 Human Resources Committee determines 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 levels of compensation and benefits for the Chief Executive
Officer.
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 1997, each of the incumbent directors seeking reelection attended 75
percent or more of the meetings of the Board of Directors and of the
committees on which the director served.
COMPENSATION OF DIRECTORS
The annual retainer and meeting fee payable to directors in 1997 were
$22,000 and $1,000, respectively, payable to non-employee directors. 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 US Airways and
receive no additional compensation as directors of the Company and US Airways.
Effective in May 1996, the compensation for non-employee directors was
changed from cash compensation plus retirement income to cash and stock
compensation. Each year active directors receive a grant of 1,500 stock
options and 500 Deferred Stock Units, both of which vest on the earlier of the
completion of their term of office or one year after grant. Using stock based
compensation for directors is intended to more closely align directors'
financial interests with that of shareholders of the Company. Additionally,
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 Deferred Stock Units based on the average price of
the stock in the month of December 1995.
7
Each director, director's spouse and the director's dependent children are
provided transportation on US Airways and reimbursement for federal income
taxes incurred thereon. Additionally, these benefits are provided for retired
directors to the extent that the director retires at age 70 with at least five
years of service on the Board, or if retiring earlier, has served on the Board
of Directors at least ten years. During 1997, non-employee directors received
the following benefits under this program:
VALUE OF
TRANSPORTATION
DIRECTOR(1) BENEFITS
- ----------- --------------
Mathias J. DeVito................................................ $ 6,016
George J. W. Goodman............................................. $ 4,097
John W. Harris................................................... $16,639
Edward A. Horrigan, Jr. ......................................... $10,213
Robert L. Johnson................................................ -0-
Robert LeBuhn.................................................... $22,241
John G. Medlin, Jr. ............................................. $ 1,463
Hanne M. Merriman................................................ $16,323
Raymond W. Smith................................................. -0-
- --------
(1) Robert Bogle and Edwin Colodny also served as active non-employee
directors during part of 1997. Messrs. Bogle and Colodny received $1,434
and $6,675, respectively, in travel benefits under this program while they
were active and, in the case of Mr. Bogle, for the year following the
completion of his service and, in the case of Mr. Colodny, as a retired
director.
EXECUTIVE OFFICERS
The named executive officers of the Company are: Stephen M. Wolf, Chairman
and Chief Executive Officer of the Company and US Airways; Rakesh Gangwal,
President and Chief Operating Officer of the Company and US Airways; John R.
Long III, Executive Vice President--Human Resources of US Airways; Lawrence M.
Nagin, Executive Vice President--Corporate Affairs and General Counsel of the
Company and US Airways; and John W. Harper, former Senior Vice President--
Finance and Chief Financial Officer of the Company and US Airways. Messrs.
Wolf, Gangwal and Nagin joined the Company in early 1996. Mr. Harper retired
from the Company in January of 1998.
8
COMPENSATION OF EXECUTIVE OFFICERS
The Summary Compensation Table below sets forth the compensation paid during
the years indicated to each individual who served as the Chief Executive
Officer during any portion of the last fiscal year and the four remaining most
highly compensated executive officers of the Company (including its
subsidiaries).
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- --------------------------
OTHER
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK ALL OTHER
POSITION YEAR SALARY BONUS(A) COMPENSATION AWARDS(G) OPTIONS COMPENSATION(M)
------------------ ---- -------- -------- ------------ ---------------- --------- ---------------
Stephen M. Wolf......... 1997 $500,000 $500,000 $ 176,188(B) $1,920,000(H) 0 $ 323,857
Chairman of the Board 1996 $451,923 $500,000 $ 145,962(B) $5,118,750(H) 1,300,000 $ 74,337
and Chief Executive 1995 -- -- -- -- -- --
Officer
Rakesh Gangwal.......... 1997 $428,846 $429,000 $ 26,087(C) $1,200,000(I) 0 $ 77,445
President and Chief 1996 $330,769 $400,000 $1,948,882(C) $4,281,250(I) 850,000 $ 89,704
Operating Officer 1995 -- -- -- -- -- --
Lawrence M. Nagin....... 1997 $351,538 $387,000 $ 17,418(D) $ 0 45,000 $ 95,442
Executive Vice 1996 $292,923 $513,000 $ 2,400(D) $ 787,500(J) 225,000 $ 89,265
President--Corporate 1995 -- -- -- -- -- --
Affairs and General
Counsel
John R. Long, III....... 1997 $340,000 $340,000 $ 12,654(E) $ 0 45,000 $ 78,227
Executive Vice 1996 $329,654 $238,000 $ 6,687(E) $ 0 0 $ 255,914(N)
President--
Human Resources 1995 $275,000 $ 81,813 $ 21,847(E) $ 223,125(K) 0 $ 62,328(N)
John W. Harper.......... 1997 $295,000 $ 0 $ 1,962(F) $ 0 35,000 $ 80,074
Former Senior Vice 1996 $293,269 $154,875 $ 492(F) $ 0 0 $ 99,355(N)
President--Finance and 1995 $250,000 $ 63,750 $ 172(F) $ 127,500(L) 0 $ 60,588(N)
Chief Financial Officer
- --------
(A) Incentive awards reflected for the years 1997, 1996 and 1995 were earned
in 1997, 1996 and 1995 but paid in 1998, 1997 and 1996, respectively. The
1996 incentive award reflected for Mr. Nagin includes a $275,000 signing
bonus paid in 1996.
(B) Amount disclosed for 1997 includes $75,000 in living expenses reimbursed
for 1997 and $62,975 paid for tax liability on such amount, $25,000 paid
for tax and financial planning services for 1997, $12,000 paid for
automobile expenses, and $1,213 in income and tax liability payments
related to personal travel on US Airways. Amount disclosed for 1996
includes $70,902 in living expenses reimbursed for 1996, $59,535 paid for
tax liability on such amount, and $15,525 paid for tax and financial
planning services for 1996.
(C) Amount disclosed for 1997 includes $18,799 paid for automobile expenses
and $7,288 in income and tax liability payments related to personal travel
on US Airways. Amount disclosed for 1996 includes $13,752 paid for
automobile expenses and $1,935,130 paid to establish a $1 million (after-
tax) deferred annuity, payable to Mr. Gangwal at retirement or severance.
(D) Amount disclosed for 1997 includes $6,000 for automobile expenses, $4,200
paid for tax and financial planning services, and $7,218 in income and tax
liability payments related to 1997 personal travel on US Airways (paid in
1998 for 1997). Amount disclosed for 1996 was paid for tax and financial
planning services.
(E) Amount disclosed for 1997 includes $6,000 for automobile expenses, and
$6,654 in income and tax liability payments related to personal travel on
US Airways. Amount disclosed for 1996 was income and tax liability
payments related to personal travel on US Airways. Amount disclosed for
1995 includes $16,870 in tax liability payments related to income derived
from the lapsing of restrictions on previously granted Restricted Stock
and $4,977 in income and tax liability payments related to personal travel
on US Airways.
(F) Amount disclosed for each year reflects income and tax liability payments
related to personal travel on US Airways.
(G) The aggregate number of shares of Restricted Stock held by each of Messrs.
Wolf, Gangwal, Nagin, Long and Harper on December 31, 1997, and the
respective value of such shares based on the fair market value of the
stock on such date ($61.3125) were, respectively: Mr. Wolf--323,750
shares, $19,849,922; Mr. Gangwal--200,000 shares, $12,262,500; Mr. Nagin--
30,000 shares, $1,839,375; Mr. Long--7,000 shares, $429,188; and Mr.
Harper--4,000 shares, $245,250.
(H) Amount disclosed for 1997 reflects an award of 80,000 shares of Restricted
Stock effective April 1, 1997, vesting on April 1, 2001, based on the
closing price ($24.00) on the grant date. Amount disclosed for 1996
reflects an award of 325,000 shares of Restricted Stock, effective January
22, 1996, vesting ratably on each of the four anniversaries of the grant
date, based on the closing price ($15.75) on the grant date.
9
(I) Amount disclosed for 1997 reflects an award of 50,000 shares of Restricted
Stock effective April 1, 1997, vesting on April 1, 2001, based on the
closing price ($24.00) on the grant date. Amount disclosed for 1996
reflects an award of 250,000 shares of Restricted Stock, effective
February 19, 1996, vesting 20% on each of February 19, 1996 and the four
succeeding anniversaries of the grant date, based on the closing price
($17.125) on the grant date.
(J) Amount disclosed reflects an award of 50,000 shares of Restricted Stock,
effective February 6, 1996, vesting 20% on each of February 6, 1996 and
the four succeeding anniversaries of the grant date, based on the closing
price ($15.75) on the grant date.
(K) Amount disclosed reflects an award of 17,500 shares of Restricted Stock,
effective November 28, 1995, vesting 30%, 30% and 40% on each of the first
three anniversaries of the grant date, based on the closing price ($12.75)
on the grant date.
(L) Amount disclosed reflects an award of 10,000 shares of Restricted Stock,
effective November 28, 1995, vesting 30%, 30% and 40% on each of the first
three anniversaries of the grant date, based on the closing price ($12.75)
on the grant date.
(M) As further described herein, amounts disclosed include the value of
benefits under the US Airways officer split dollar life insurance program,
contributions to the defined contribution pension plans, and moving
expense payments. Under the split dollar life insurance plan of US
Airways, individual life insurance coverage is available to the executive
officers, with US Airways paying the premium associated with this
coverage. Based on life expectancy and other assumptions, US Airways
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 in 1997, calculated on an actuarial basis, ascribed to
the insurance policies purchased on the lives of the executives, plus the
dollar value of premiums paid by US Airways with respect to the insurance:
Mr. Wolf--$53,816, Mr. Gangwal--$26,972, Mr. Nagin--$43,344, Mr. Long--
$29,827, and Mr. Harper--$34,204. During 1997, US Airways made
contributions to the accounts of Messrs. Wolf, Gangwal, Nagin, Long and
Harper, in certain defined contribution pension plans, in the following
amounts, respectively: $101,316, $50,473, $52,098, $48,400, $45,870.
During 1997, US Airways also paid $168,724 in moving expenses to Mr. Wolf.
(N) Amounts include profit sharing payments in 1996 and 1997 for fiscal years
1995 and 1996 attributable to pay reductions in 1991 and 1992 in the
following amounts: 1995, Mr. Long--$30,861 and Mr. Harper--$22,767; 1996,
Mr. Long--$81,754 and Mr. Harper--$60,310.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock option grants in 1997 to
the named executive officers.
PERCENT OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED EXERCISE GRANT DATE
UNDERLYING TO EMPLOYEES OR BASE EXPIRATION PRESENT VALUE(1)
NAME OPTION GRANTED IN 1997 PRICE DATE $
---- ---------------- ---------------- -------- ---------- ----------------
Stephen M. Wolf......... 0 0.0% -- -- --
Rakesh Gangwal.......... 0 0.0% -- -- --
Lawrence M. Nagin....... 45,000 5.0% $25.375 4/25/07 $801,450
John R. Long III........ 45,000 5.0% $25.375 4/25/07 $801,450
John W. Harper.......... 35,000 3.9% $25.375 4/25/07 $623,350
- --------
(1) The Black-Scholes model used to calculate the hypothetical values at date
of grant considers a number of factors to estimate the option's present
value, including the stock's projected volatility, the expected exercise
period of the option, interest rates and the vesting features of the
option. The following assumptions were used in determining the values
under the Black-Scholes model: (i) risk-free rate of return: 6.95%, (ii)
expected stock price volatility: 49.39%, (iii) exercise period of 10
years, and (iv) dividend yield: 0.00%. The actual value, if any, realized
upon the exercise of a stock option will depend on the excess of the
market value of the Common Stock on the date the option is exercised over
the exercise price.
10
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 1997. The unexercised options
held by all of the officers were in-the-money based on the fair market value
of the Common Stock on December 31, 1997 ($61.3125).
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SAR'S AT OPTIONS/SAR'S AT
YEAR END (#) YEAR-END ($)
SHARES ACQUIRED VALUE REALIZED ------------------------- -------------------------
NAME ON EXERCISE $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
Stephen M. Wolf......... 0 $ 0 1,075,000 225,000 $52,809,375 $11,053,125
Rakesh Gangwal.......... 0 $ 0 340,000 510,000 $15,788,750 $23,683,125
Lawrence M. Nagin....... 0 $ 0 90,000 180,000 $ 4,179,376 $ 7,886,250
John R. Long III........ 25,000 $ 690,875 60,000 45,000 $ 2,373,750 $ 1,617,188
John W. Harper.......... 61,000 $1,411,000 0 35,000 $ 0 $ 1,257,813
RETIREMENT BENEFITS
Currently, US Airways maintains a defined contribution plan retirement
program comprised of (i) a money purchase pension plan where contributions are
based on a percentage of compensation and is age-weighted, (ii) a 401(k)
savings plan with a Company match, and (iii) a profit sharing plan. This
retirement program is an individual account program and amounts contributed to
each named executive's account are included in the Summary Compensation Table
above.
Prior to 1992, US Airways' retirement plan (the "Retirement Plan") for its
salaried employees was comprised of two qualified plans--(1) the primary plan,
a defined benefit plan; and (2) the secondary plan, a target benefit defined
contribution plan. 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 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. US
Airways' contributions to the primary plan are not allocated to the account of
any particular employee. Under the secondary plan, contributions are made to
individual employee accounts to the extent allowable under the limits of the
Internal Revenue Code ("Code") when such employee's benefit produced under the
formula in the primary plan exceeds the benefit payable under the primary plan
due to the limits on defined benefit plans under the Code. US Airway's
contributions to the secondary plan are allocated to individual employees'
accounts. During 1997, no contributions were made to any executive officer's
account.
Under the Retirement Plan, benefits usually begin at the normal retirement
age of 65, however, 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 hired prior to December 31, 1991
participated in the Retirement Plan on the same basis as other employees of US
Airways. The Retirement Plan was frozen on December 31, 1991, and there have
been no benefit accruals under the primary or secondary plan since that date.
Contributions to and benefits payable under the Retirement Plan must be in
compliance with the applicable guidelines or maximums established by the Code.
US Airways has adopted an unfunded supplemental plan which
11
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 maintained by US Airways. 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. Mr. Long is currently the only executive officer entitled to
receive retirement benefits under this supplemental plan.
The following table presents the noncontributory benefits payable per year
for life to employees under the frozen 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.
NONCONTRIBUTORY PENSION BASED ON YEARS OF
FNAL EARNINGSI SERVICE
A DEFINED INS --------------------------------------------
THE PLAN 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- -------------- -------- -------- -------- -------- --------
$ 100,000......................... $ 19,169 $ 28,753 $ 38,338 $ 47,922 $ 52,922
200,000......................... $ 43,169 $ 64,753 $ 86,338 $107,922 $117,922
300,000......................... $ 67,169 $100,753 $134,338 $187,922 $182,922
400,000......................... $ 91,169 $136,753 $182,338 $227,922 $247,922
500,000......................... $115,169 $172,753 $230,338 $287,922 $312,922
600,000......................... $139,169 $208,753 $278,338 $347,922 $377,922
700,000......................... $163,169 $244,753 $326,338 $407,922 $442,922
800,000......................... $187,169 $280,753 $374,338 $467,922 $507,922
900,000......................... $211,169 $316,753 $422,338 $527,922 $572,922
1,000,000......................... $235,169 $352,753 $470,338 $587,922 $637,922
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: Messrs. Wolf, Gangwal, Nagin and Harper--none, and
Mr. Long--16 years.
US Airways has entered into agreements with Messrs. Wolf, Gangwal, Nagin,
Long and Harper which provide for a supplement to their accrued retirement
benefits under the Retirement Plan. The supplements are designed to provide
such persons with the benefits they would have received had they been employed
by US Airways for the number of years to be entitled to full retirement
benefits under the Retirement Plan (as if the Retirement Plan had not been
frozen). The benefits under the supplemental retirement arrangements are based
on base salary and assumed maximum bonus for Messrs. Wolf and Gangwal, base
salary and assumed target bonus for Mr. Nagin, and base salary and actual
bonus paid for Messrs. Long and Harper. These benefits are subject to an
offset for benefits payable under the tax-qualified and non-qualified defined
contribution plan retirement program. The credited years of service under
these supplemental arrangements for each of the individuals included in the
Summary Compensation Table are as follows: Mr. Wolf-30 years, Mr. Gangwal-10
years, Mr. Nagin-8 years, Mr. Long-16 years and Mr. Harper--19 years.
12
EMPLOYMENT ARRANGEMENTS
Under his employment arrangements with US Airways, Mr. Wolf is entitled to
an annual base salary of not less than $500,000. In addition, Mr. Wolf is
eligible for an annual bonus pursuant to the terms of the Company's Incentive
Compensation Plan. Under the plan, Mr. Wolf may receive a bonus of 100% of
annual base salary for target results, which may be increased for results in
excess of the target up to a maximum bonus of 200% of base salary.
Under his employment agreement with US Airways, Mr. Gangwal is entitled to
an annual base salary of not less than $450,000. In addition, Mr. Gangwal is
eligible for an annual bonus pursuant to the terms of the Company's Incentive
Compensation Plan. If the Company achieves its target objectives, Mr. Gangwal
may receive a bonus of 70% of his annual base salary, which may be increased
for results in excess of the target up to a maximum bonus of 140% of his base
salary.
Under their employment arrangements with US Airways, Messrs. Nagin and Long
are entitled to annual base salaries of not less than $360,000 and $340,000,
respectively. Both Mr. Nagin and Mr. Long are eligible for an annual bonus
pursuant to the terms of the Company's Incentive Compensation Plan. If the
Company achieves its target objectives, Messrs. Nagin and Long may receive a
bonus of 55% of their annual base salary, which may be increased for results
in excess of the target up to a maximum bonus of 110% of their base salaries.
Under the terms of the Incentive Compensation Plan, bonus eligibility for
the executive officers will be based on performance criteria to be established
by the Human Resources Committee or payable at the Committee's descretion, if
they believe performance and circumstances are appropriate for such payment.
The Committee retains the discretion to pay a bonus above the maximum
percentage established, if they believe performance warrants such payment.
In connection with their employment arrangements, each of Messrs. Wolf,
Gangwal and Nagin also received relocation assistance and 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.
Mr. Harper's employment agreement terminated pursuant to its terms effective
with his retirement in January of 1998.
ARRANGEMENTS CONCERNING TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
US Airways 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 for Mr. Wolf, and the third anniversary thereof for Messrs. Gangwal,
Nagin, and Long, or the Executive's normal retirement date, and are subject to
automatic one-year annual extensions on each anniversary date unless advance
written notice is given by US Airways. In exchange for each Executive's
commitment to devote his full business efforts to US Airways, 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
13
automatically extended until the earlier of the fourth or third anniversary,
as applicable, of the change of control date or the Executive's normal
retirement date.
The Employment Contracts provide that, should US Airways 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 US Airways 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, US Airways or its successor would be required to pay the Executive
a lump sum equal to (i) his annual base salary for the then remaining term of
the Employment Contract, in the case of Mr. Wolf, or (ii) three years' base
salary in the case of Messrs. Gangwal, Nagin and Long, 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 remained employed by
US Airways 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, and (v)
continuation of certain other benefits during the remainder of the term of the
Employment Contract. In addition, in the case of Messrs. Wolf, Gangwal and
Nagin, during the 30-day period immediately following the first anniversary of
a change of control they could elect to terminate their Employment Contracts
for any reason and receive the liquidated damages described in the immediately
preceding sentence. Each Employment Contract provides that the Executive shall
be entitled to recover from US Airways 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
taxes he would incur as a result of such payments, the Executive would receive
the same after-tax amount he would have received had no excise tax been
imposed under Section 4999 of the Code.
In consideration of Mr. Harper's agreement to provide reasonable transition
assistance prior to his retirement, the Company agreed to provide Mr. Harper
with severance benefits including (1) one year's base salary, (2) one year's
additional service under his supplemental retirement arrangement, and (3) the
vesting of 7,000 stock options on March 25, 1998.
Currently, under the Company's 1996 Stock Incentive Plan (the "1996 Plan"),
pursuant to which employees of the Company and its subsidiaries have been
awarded stock options with respect to Common Stock and 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, and under certain circumstances, would cause shares of
Restricted Stock to vest. 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.
14
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
OR US AIRWAYS' FILINGS UNDER 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.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee (the "Committee") is responsible for
determining the annual salary, short-term and long-term cash and stock
incentive compensation, and other compensation of the executive officers,
including the executive officers named in the Summary Compensation Table. This
report describes the policies and approach of the Committee in establishing
executive compensation during 1997.
COMMITTEE APPROACH TO COMPENSATION
In determining the principal components of executive compensation, the
Committee, in consultation with the Executive Vice President--Human Resources
and an independent compensation consultant, considers the following factors:
(a) Company performance, both year over year and in comparison to other
companies; (b) the individual performance of the executive; (c) comparative
compensation studies; (d) historical compensation levels at the Company; and
(e) the overall competitive environment in executive compensation needed to
attract, retain and motivate talented and experienced senior management.
The Committee reviews the compensation levels for peer-level positions of
premier companies of similar size to the Company, as well as at other major
domestic passenger airlines, including, but not limited to, Delta Air Lines,
Inc. ("Delta"), United Air Lines ("United"), American Airlines ("American"),
and Northwest Airlines, Inc. ("Northwest"). Three of these airlines are
included in the S & P Airline Index used in the Performance Graph.
COMPONENTS OF EXECUTIVE COMPENSATION
Base Salary. Generally, the Committee reviews compensation survey data and
total compensation is targeted between the median and upper end of the
comparison range. However, given the historical financial difficulties of the
Company during 1990 through 1994 and the ongoing issues to reduce its business
costs to compete with low fare competitors, the Committee targeted base salary
for the named executive officers in the lower to median end of the comparison
range and targeted median to above average end for stock awards. Base salaries
are reviewed annually, in connection with promotions and when responsibilities
for the position are changed.
The Chief Executive Officer's base salary was established in 1996 when he
first joined the Company. As stated above, the Chief Executive Officer's base
salary was set at the lower end of the comparison range. Mr. Wolf's base
salary has not been increased since then and it remains lower than the base
salaries for the chief executive officers of United, American and Delta.
Annual Cash Incentive Compensation. The Committee adopted and administers
the Incentive Compensation Plan (the "ICP plan"). All officers, including the
named executive officers, and certain other key management employees of the
Company are eligible to participate in the ICP plan. The ICP plan provides for
the payment of both incentive and discretionary awards. The incentive awards
are based upon the Company achieving a pre-established performance objective
which is set by the Committee annually. The Committee also establishes target
percentages for each executive. For the 1996 fiscal year, the Company's
results exceeded the objective and the Committee awarded incentive payments to
the executive officers ranging from their target percentage up to the maximum
percentage.
15
During 1997 the Company's compensation consultant conducted a survey of
incentive compensation ranges for comparable airline companies as well as
general industry companies of comparable revenue size. Based on this survey,
the Committee revised the incentive target percentages for executives. The
target awards for the executive officers range from 55% of base salary for the
Executive Vice Presidents, 70% of base salary for the President, and 100% of
base salary for the Chief Executive Officer. If the Company's objective is
exceeded, then the incentive award may also be increased up to a maximum
amount of double the target percentage, or 110% to 200% of base salary. The
Committee retains the discretion to adjust any award based on individual
performance. The Committee also retains the discretion to pay a discretionary
award in a year when the Company did not achieve its objective or to pay an
award in addition to the maximum incentive award when circumstances are
appropriate for such discretionary awards.
For fiscal year 1997, the ICP plan set as the Company's target objective a
stated percentage "Operating Margin." The Company achieved its maximum
financial objective for 1997 and the Committee awarded payments commensurate
with this performance.
Stock Options. The executive officers of the Company participate in the
Company's 1996 Stock Incentive Plan (the "1996 Plan") which is administered by
the Committee. The Committee is authorized to grant options under the 1996
Plan 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 is also authorized
under the terms of the 1996 Plan to grant awards of Restricted Stock. As
stated above, the Committee set the long-term incentive compensation for its
executive officers at the high end of the comparison range. The Committee
believes that granting stock options and Restricted Stock to executive
officers aligns the executive's interests more closely with those of the
stockholders of the Company by tying a meaningful portion of compensation to
the performance of the Company's stock. The Committee considers the individual
performance of each executive officer, historical stock grants made by the
Company to the individual and the recommendations of the consultant based on
survey data.
Historically, stock options have generally been granted annually, although
this practice was interrupted during 1993 through 1996. In 1996 when the Chief
Executive Officer and other executive officers joined the Company, the
Committee awarded them sizable grants of stock options and Restricted Stock in
part to induce them to join the Company and also as an incentive to build
shareholder value. These grants had vesting schedules over a four-year period.
Based on the significant improvement in the performance of the Company during
1996 and 1997, the Committee granted Messrs. Wolf and Gangwal additional
shares of Restricted Stock in 1997 (with cliff vesting in the year 2001),
while Messrs. Nagin, Long and Harper received additional grants of stock
options (ratably vesting over a five-year period).
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.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code limits the tax deduction of a publicly-held
company allowed for compensation paid to the Chief Executive Officer and to
the four most highly compensated executive officers other than the Chief
Executive Officer. Generally, the Committee desires to maintain the tax
deductibility of compensation for executive officers to the extent it is
feasible and consistent with the objectives of the Company's compensation
programs. Some, but not all, of the compensation programs established for
executive officers comply with the deductibility requirements under Section
162(m). The Committee continues to consider ways to maximize the deductibility
of executive compensation, but intends to retain the discretion the Committee
deems necessary to
16
compensate executive officers in a manner commensurate with performance and
the competitive environment for executive talent.
This report has been approved by all members of the Committee.
Mathias J. DeVito, Chairman
George J. W. Goodman
John W. Harris
John G. Medlin, Jr.
Raymond W. Smith
17
[LINE GRAPH APPEARS HERE]
The above graph compares the performance of the Company's Common Stock during
the period December 31, 1992 to December 31, 1997 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, 1992. 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.
18
SELECTION OF AUDITORS (ITEM NO. 2)
The Board of Directors has named KPMG Peat Marwick LLP as independent public
accountants to examine the consolidated financial statements of the Company
for fiscal year 1998, subject to ratification and approval by the
stockholders. KPMG Peat Marwick LLP acted in the same capacity during 1997. 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 1997 services will amount to approximately
$1,128,000, including $589,000 for the examination of financial statements and
issuance of reports in compliance with debt or other agreements relating to
annual audited financial statements and $539,000 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.
PROPOSED AMENDMENT TO THE CORPORATION'S 1996 STOCK INCENTIVE PLAN (ITEM NO. 3)
At the 1996 annual meeting, the stockholders of the Company approved the
adoption of the 1996 Plan. The 1996 Plan covers key employees of the Company
and US Airways including executive officers. Since then, of the 3,100,000
shares of Common Stock authorized for issuance under the 1996 Plan, 2,600,000
shares (i) have been issued upon the exercise of stock options, or (ii) have
been issued as Restricted Stock, or (iii) are reserved for issuance upon the
exercise of stock options. In order to support the Company's long-term
incentive compensation programs to attract and retain top quality management,
additional shares are needed. Accordingly, the Board of Directors has approved
and recommends to stockholders the reservation of an additional 2,000,000
shares of Common Stock for issuance under the 1996 Plan.
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, a
copy of which is on file with the SEC. The 1996 Plan is 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
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 are 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 will 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.
19
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 awards under the 1996 Plan. 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 will 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
Restricted Period may differ among the 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. Except for such restrictions, however, a grantee will 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 will 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, will 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
Since awards under the 1996 Plan are made in the discretion of the
Committee, neither the awards that will be made in 1998 nor the awards that
would have been made in 1997 had the amendment been in effect are reasonably
ascertainable.
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.
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
20
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 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. 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 March 25, 1998, the closing price of the Company's Common Stock as
reported on the New York Stock Exchange Composite Tape was $72.563 per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE 1996 PLAN.
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL RELATING TO THE ANNUAL MEETING DATE (ITEM NO. 4)
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 present in person or
represented by proxy at the meeting and entitled to vote.
"RESOLVED: That the stockholders recommend that the Board of Directors take
the necessary steps to change the Annual Meeting date to the second
Wednesday in June."
SUPPORTING STATEMENT OF THE PROPONENT
Recently the annual Meeting was held on a date where other major
corporations met. Until a few years ago, the Company has met on a date
where more independent non-employee shareholders could meet. The 1997 date
was on the SAME date as two major competitors--AMR and United.
If you AGREE, please mark your proxy FOR this resolution.
21
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company's by-laws presently provide that the annual meeting of
stockholders be held on the fourth Wednesday in May or at such other date as
may be designated by the Board of Directors. The Company encourages all
stockholders to attend the meeting in person if possible but recognizes that,
due to the large number of stockholders involved, any date selected may be
convenient for some stockholders and present a conflict for others. The Board
of Directors believes that it is in the best interests of the Company and its
stockholders to retain the flexibility provided in the by-laws and not be
limited to the annual meeting date specified in the proposal.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE
STOCKHOLDER RESOLUTION (ITEM NO. 4)
STOCKHOLDER PROPOSAL CONCERNING CONFIDENTIAL VOTING (ITEM NO. 5)
The New York City Police Pension Fund, One Centre Street, New York, New York
10007-2341, which owns 59,655 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, present in person or represented by proxy at the
meeting and entitled to vote.
"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 35.6% 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.
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
22
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.
This proposal was rejected by the shareholders last year by a vote of 64.4%
against.
ACCORDINGLY, THE BOARD OF DIRECTORS URGES YOU TO VOTE AGAINST THE
STOCKHOLDER RESOLUTION (ITEM NO. 5).
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.
23
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 US Airways 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 1999 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 1999 annual meeting of stockholders,
expected to be held in late May 1999, must be received at the Company's
principal executive offices by January 23, 1999.
By Order of the Board of Directors,
Michelle V. Bryan
Secretary
March 31, 1998
24
Detach Proxy Card Here
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US AIRWAYS GROUP, INC.
PROXY
Proxy Solicited on Behalf of The Board of Directors for Annual Meeting of
Stockholders on May 20, 1998
The undersigned hereby appoints M.V. Bryan 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 US Airways 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 US Airways, Inc. Employee
Stock Ownership Plan, the US Airways, Inc. Employee Savings Plan, the US
Airways, 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 14, 1998, in
order to be voted in a timely manner by the administrator of the Plans, Fidelity
Management Trust Company (the "Administrator"). After May 14, 1998, the
instructions cannot be revoked and, in accordance with the Plans, you may not
vote these shares in person at the meeting. 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. The Bank of New York will tally the
votes on behalf of the Administrator.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
US AIRWAYS GROUP, INC.
P.O. BOX 11130
NEW YORK, NY 10203-0130
Comments:
---------------------------------------
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Detach Proxy Card Here
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BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3 AND AGAINST ITEMS 4
AND 5.
1. Election of Director Nominees: M.J. DeVito, R. Gangwal, G.J.W. Goodman,
J.W. Harris, E.A. Horrigan, Jr.,
R.L. Johnson, R. LeBuhn, J.G. Medlin, Jr.,
H.M. Merriman, R.W. Smith, S.M. Wolf.
FOR all nominees WITHHOLD AUTHORITY *EXCEPTIONS
listed above [X] to vote for all nominees [X] [X]
listed above
(INSTRUCTIONS: To vote for all nominees other than certain specified nominees,
mark the "Exceptions" box and write the nominee's name in the space provided
below.)
*Exceptions
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2. Approval of the selection FOR [X] AGAINST [X] ABSTAIN [X]
of KPMG Peat Marwick L.L.P as
auditors.
3. Approval of an amendment to FOR [X] AGAINST [X] ABSTAIN [X]
the US Airways Group, Inc.
1996 Stock Incentive Plan.
- --------------------------------------------------------------------------------
4. Stockholder proposal FOR [X] AGAINST [X] ABSTAIN [X]
concerning the date of the
annual meeting.
5. Stockholder proposal FOR [X] AGAINST [X] ABSTAIN [X]
concerning confidential
voting.
Change of Address and/or
Comments Mark Here [X]
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.
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature
Dated: ___________________________________________________________________, 1998
Votes MUST be indicated (x) in Black or Blue ink. [X]