SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Delta Air Lines, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
(DELTA LOGO)
To Our Shareowners:
On behalf of the Board of Directors, it is my pleasure to invite you to attend
the 2003 Annual Meeting of Shareowners of Delta Air Lines, Inc. The meeting will
be held on Friday, April 25, 2003, at The Plaza Hotel, Fifth Avenue at Central
Park South, New York, New York 10019, beginning at 10:30 a.m., local time.
The purpose of the meeting is to act on the matters listed in the attached
Notice. There will also be an opportunity to discuss matters of interest to you
as a shareowner.
If you plan to attend the meeting, please indicate your intent when prompted by
our Internet or telephone voting system, or mark the appropriate box on your
proxy card and return it to us.
Please note that you will need to show you are a Delta shareowner to attend the
meeting. If your shares are registered in your name, please bring the enclosed
admission ticket to the meeting. If your shares are in the name of a broker or
bank, please bring evidence of your stock ownership such as your most recent
brokerage account statement. All shareowners will be required to present valid
picture identification. IF YOU DO NOT HAVE VALID PICTURE IDENTIFICATION AND
EITHER AN ADMISSION TICKET OR PROOF THAT YOU OWN DELTA STOCK, YOU WILL NOT BE
ADMITTED TO THE MEETING.
If you will need special assistance at the meeting because of a disability,
please contact Ms. Suzanne Rolon, Specialist, Investor Relations, at (404)
715-2391 or toll free at (866) 715-2170.
If you are unable to attend the meeting, you can listen to it live over the
Internet on Delta's website at: www.delta.com/inside/investors/index.jsp. A
replay will be available through May 25, 2003.
To receive future proxy materials electronically through the Internet, please
sign up at Delta's website, listed in the paragraph above. The Internet provides
a simple, convenient way to receive future annual reports and proxy statements,
and it is cost-effective for Delta. If you have a computer with Internet access,
we hope you will try this electronic distribution method.
Your vote is important. You can ensure that your shares are voted at the meeting
by using our Internet or telephone voting system, or by completing, signing and
returning the enclosed proxy card.
Cordially,
/s/ Leo F. Mullin
Leo F. Mullin
Chairman of the Board and
Chief Executive Officer
Atlanta, Georgia
March 25, 2003
(DELTA LOGO)
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
PLACE: The Plaza Hotel, Fifth Avenue at Central Park South, New
York, New York 10019
DATE AND TIME: Friday, April 25, 2003, at 10:30 a.m., local time
ITEMS OF BUSINESS: 1. To elect nine directors.
2. To ratify the appointment of Deloitte & Touche LLP as
Delta's independent auditors for the year ending
December 31, 2003.
3. To approve the amendments to the Delta 2000 Performance
Compensation Plan, the DeltaShare Stock Option Plan and
the Pilots Stock Option Plan to authorize a stock option
exchange program.
4. To consider and vote on the six shareowner proposals
described in the accompanying proxy statement, if those
proposals are presented at the meeting.
5. To transact such other business as may properly come
before the meeting.
WHO MAY ATTEND: Attendance is limited to Delta shareowners or their
representatives. To be admitted to the meeting, please
present valid picture identification and either an
admission ticket, proof that you own Delta stock or a proxy
from a shareowner of record.
WHO MAY VOTE: You may vote if you were a shareowner of record of Delta's
common stock or Series B ESOP Convertible Preferred Stock
at the close of business on February 28, 2003, or if you
hold a proxy from a shareowner of record.
LIST OF SHAREOWNERS: During the ten-day period prior to the meeting, a list of
shareowners entitled to vote at the meeting will be
available during normal business hours at Delta's Investor
Relations Department, 1030 Delta Boulevard, Atlanta,
Georgia 30354. The shareowner list will also be available
at the meeting.
PROXY VOTING: Your vote is important. Please vote in one of the following
ways:
1. visit the Internet web site listed on your proxy card;
2. call the toll-free telephone number listed on your proxy
card; or
3. mark, sign, date and return the enclosed proxy card in
the postage-paid envelope.
By Order of the Board of Directors,
/s/ Robert S. Harkey
Robert S. Harkey
Senior Vice President-General Counsel
and Secretary
Atlanta, Georgia
March 25, 2003
TABLE OF CONTENTS
PAGE
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Voting Information.......................................... 1
Proposal 1 -- Election of Directors......................... 4
Certain Information About Nominees........................ 5
The Board of Directors and Board Committees............... 6
Compensation of Directors................................. 9
Compensation Committee Interlocks and Insider
Participation.......................................... 10
Beneficial Ownership of Securities.......................... 10
Beneficial Owners of More Than 5% of Voting Stock......... 10
Directors, Nominees for Director and Executive Officers... 11
Personnel & Compensation Committee Report on Executive
Compensation.............................................. 12
Executive Compensation...................................... 19
Information About Summary Compensation Table.............. 19
Summary Compensation Table................................ 21
Option Grants in Last Fiscal Year......................... 22
Aggregated Option Exercises in Last Fiscal Year and FY-End
Option Values.......................................... 23
Long-Term Incentive Plans -- Awards in Last Fiscal Year... 24
Retirement Plans and Other Agreements..................... 25
Equity Compensation Plan Information...................... 30
Stock Performance Graph................................... 31
Audit Committee Report...................................... 32
Proposal 2 -- Ratification of the Appointment of Independent
Auditors.................................................. 33
Fees of Independent Auditors for Year Ended December 31,
2002................................................... 33
Information Regarding Change of Independent Auditors...... 33
Proposal 3 -- Approval of Amendments to the Delta 2000
Performance Compensation Plan, the DeltaShare Stock Option
Plan and the Pilots Stock Option Plan..................... 34
Proposals 4, 5, 6, 7, 8 and 9 -- Shareowner Proposals....... 39
General Information......................................... 49
Cost of Solicitation...................................... 49
Submission of Shareowner Proposals........................ 50
Section 16 Beneficial Ownership Reporting Compliance...... 50
Extent of Incorporation by Reference of Materials Included
in or Accompanying This Proxy Statement................ 50
Appendix A -- Summary of Delta 2000 Performance Compensation
Plan...................................................... A-1
Appendix B -- Summary of DeltaShare Stock Option Plan and
Pilots Stock Option Plan.................................. B-1
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PROXY STATEMENT
VOTING INFORMATION
WHAT IS THE PURPOSE OF THIS PROXY STATEMENT?
This proxy statement is being provided to you in connection with the
solicitation of proxies by the Board of Directors of Delta Air Lines, Inc. The
proxies will be voted at Delta's 2003 Annual Meeting of Shareowners and at any
adjournment of the meeting. The annual meeting will be held on Friday, April 25,
2003, at The Plaza Hotel, Fifth Avenue at Central Park South, New York, New York
10019, beginning at 10:30 a.m., local time. Delta's proxy statement, proxy card
and Annual Report to Shareowners are being mailed to shareowners beginning on or
about March 25, 2003.
WHEN IS THE RECORD DATE FOR THE MEETING? WHAT CLASSES OF STOCK ARE ELIGIBLE TO
VOTE?
February 28, 2003 is the record date for determining the shareowners entitled to
notice of and to vote at the annual meeting. On that date, 123,416,897 shares of
Delta's common stock ("Common Stock") and 6,025,253 shares of Delta's Series B
ESOP Convertible Preferred Stock ("ESOP Preferred Stock") were outstanding. The
Common Stock and ESOP Preferred Stock are the only classes of securities
entitled to vote at the meeting.
Each outstanding share of Common Stock entitles its holder to one vote. Each
outstanding share of ESOP Preferred Stock entitles its holder to two votes,
subject to adjustment in certain circumstances. Holders of the Common Stock and
ESOP Preferred Stock will vote together as a single class on all matters
presented at the annual meeting.
WHAT IS THE QUORUM FOR THE MEETING?
A quorum at the annual meeting will consist of a majority of the votes entitled
to be cast by the holders of all shares of Common Stock and ESOP Preferred Stock
that are outstanding and entitled to vote. No business may be conducted at the
meeting if a quorum is not present. Abstentions from voting and "broker
non-votes," described below, will be counted in determining whether a quorum is
present.
HOW MANY VOTES ARE NEEDED TO ACT ON PROPOSALS AT THE MEETING?
A plurality of the votes cast by holders of the Common Stock and the ESOP
Preferred Stock, voting together as a single class, is required for the election
of directors.
A majority of the votes present at the meeting and entitled to vote will be
necessary:
(1) to ratify the appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 2003;
(2) to approve the amendments to the Delta 2000 Performance Compensation Plan,
the DeltaShare Stock Option Plan and the Pilots Stock Option Plan to
authorize a stock option exchange program; provided that the total votes
cast on this proposal represent over 50% in interest of all securities
entitled to vote on this proposal; and
(3) to approve each of the six shareowner proposals described in this proxy
statement.
An abstention from voting on any proposal described in Items 1 through 3 above
has the same effect as a vote against that proposal.
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HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
The Board recommends that you vote:
(1) FOR the election of the director-nominees named in this proxy statement;
(2) FOR the ratification of the appointment of Deloitte & Touche LLP as Delta's
independent auditors for the year ending December 31, 2003;
(3) FOR the amendments to the Delta 2000 Performance Compensation Plan, the
DeltaShare Stock Option Plan and the Pilots Stock Option Plan to authorize a
stock option exchange program; and
(4) AGAINST each of the six shareowner proposals described in this proxy
statement.
HOW MAY I VOTE SHARES REGISTERED IN MY NAME?
You may vote shares registered in your name in person at the meeting or by
submitting a proxy before the meeting. To vote by proxy, please choose one of
the following options:
VOTING BY THE INTERNET OR TELEPHONE. You may vote using the Internet or
telephone by following the instructions on your proxy card. The Internet and
telephone voting procedures are designed to authenticate votes cast by use of a
personal identification number. These procedures enable shareowners to appoint a
proxy to vote their shares and to confirm that their instructions have been
properly recorded.
VOTING BY WRITTEN PROXY CARD. You may vote by signing, dating and returning the
proxy card in the enclosed postage-paid envelope. Please sign the proxy card
exactly as your name appears on the card. If shares are owned jointly, each
joint owner should sign the proxy card. If a shareowner is a corporation or
partnership, the proxy card should be signed in the full corporate or
partnership name by a duly authorized person. If the proxy card is signed
pursuant to a power of attorney or by an executor, administrator, trustee or
guardian, please state the signer's full title and provide a certificate or
other proof of appointment.
HOW ARE PROXIES VOTED?
All properly submitted proxies, whether submitted by the Internet, telephone or
mail, will be voted at the annual meeting according to the instructions given in
the proxy. The members of Delta's Board of Directors designated to vote the
proxies returned pursuant to this solicitation are Edward H. Budd, Gerald
Grinstein and Leo F. Mullin.
WHAT IF A PROPERLY EXECUTED PROXY CARD IS RETURNED WITHOUT ANY VOTING
INSTRUCTIONS?
If you are a shareowner of record and return a written proxy card without voting
instructions, your shares will be voted:
(1) FOR the election of the director-nominees named in this proxy statement;
(2) FOR the ratification of the appointment of Deloitte & Touche LLP as Delta's
independent auditors for the year ending December 31, 2003;
(3) FOR the amendments to the Delta 2000 Performance Compensation Plan, the
DeltaShare Stock Option Plan and the Pilots Stock Option Plan to authorize a
stock option exchange program; and
(4) AGAINST each of the six shareowner proposals described in this proxy
statement.
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IF I SUBMIT A PROXY, MAY I STILL VOTE MY SHARES AT THE MEETING?
Submitting a proxy by the Internet, telephone or mail will not limit your right
to vote at the annual meeting if you decide to attend the meeting and vote in
person.
MAY I REVOKE A PROXY?
You may revoke your proxy prior to the meeting (1) by providing written notice
to Delta's Secretary, Robert S. Harkey, at Delta Air Lines, Inc.; Dept. No. 981;
Post Office Box 20574; Atlanta, Georgia 30320; or (2) by submitting a
later-dated proxy by the Internet, telephone or mail. You may also revoke your
proxy by attending the annual meeting and voting in person. Attending the
meeting will not, by itself, revoke a proxy.
HOW DO I VOTE MY SHARES HELD IN "STREET NAME"?
If your shares are held in the name of a broker, bank or other record holder,
please provide voting instructions to the shareowner of record. You may also
obtain a proxy from the shareowner of record permitting you to vote in person at
the annual meeting.
IF I HOLD SHARES IN A BROKERAGE ACCOUNT AND DO NOT RETURN VOTING INSTRUCTIONS,
WILL MY SHARES BE VOTED?
Under New York Stock Exchange rules, brokerage firms may vote in their
discretion on certain matters on behalf of clients who did not provide voting
instructions at least fifteen days before the date of the annual meeting.
Generally, brokerage firms may vote on proposals to elect directors; to ratify
the selection of independent auditors; and on other "discretionary" items under
NYSE rules, such as the amendments to the 2000 Performance Compensation Plan,
the DeltaShare Stock Option Plan, the Pilots Stock Option Plan to authorize a
stock option exchange program. In contrast, brokerage firms may not vote on the
shareowner proposals described in this proxy statement because those proposals
are "non-discretionary" items. This means that, if your shares are held in a
brokerage account and you do not return voting instructions to your broker by
the deadline, your shares may be voted on some, but not all, of the proposals
described in this proxy statement. "Broker non-votes" will not be considered in
determining the number of votes cast in connection with non-discretionary items.
WHAT IS THE DELTA FAMILY-CARE SAVINGS PLAN? HOW IS DELTA STOCK HELD BY THE
SAVINGS PLAN VOTED?
The Delta Family-Care Savings Plan ("Savings Plan") is a broad-based plan that
allows eligible employees to contribute a portion of their pay to various
investment funds, including a fund invested primarily in Delta Common Stock
("Delta Common Stock Fund"). Delta also makes contributions to the Savings Plan,
and a portion of Delta's contributions is invested in ESOP Preferred Stock and
Common Stock ("Preferred Stock Fund"). At December 31, 2002, there were
approximately 72,400 participants in the Savings Plan. Fidelity Management Trust
Company is the trustee of the Savings Plan.
The Savings Plan provides that shares of Common Stock and ESOP Preferred Stock
will be voted by the trustee as follows:
DELTA COMMON STOCK FUND. Shares of Common Stock attributable to a participant's
account in the Delta Common Stock Fund ("Attributable Shares") will be voted (1)
in accordance with the participant's confidential voting instructions; or (2) if
no voting instructions are received by
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the trustee before the specified deadline, in the same proportion as the votes
cast on Attributable Shares pursuant to participants' voting instructions.
PREFERRED STOCK FUND. Shares of ESOP Preferred Stock and Common Stock allocated
to a participant's account in the Preferred Stock Fund ("Allocated Shares") will
be voted (1) in accordance with the participant's confidential voting
instructions; or (2) if no voting instructions are received by the trustee
before the specified deadline, in the same proportion as the votes cast on
Allocated Shares pursuant to participants' voting instructions. Shares of ESOP
Preferred Stock not yet allocated to any participant's account will be voted in
the same proportion as the votes cast on Allocated Shares pursuant to
participants' voting instructions.
Participants in the Savings Plan will receive from the trustee a Voting
Instruction Form which states the deadline for the trustee's receipt of voting
instructions from participants.
WHAT IF OTHER BUSINESS IS PRESENTED AT THE MEETING?
Delta received notice from a shareowner of his intent to present several
proposals for shareowner consideration at the annual meeting pursuant to Section
3.1 of Delta's By-Laws. Delta has reviewed these proposals, and determined that
only one -- that Delta publish instructions and deadlines for shareowner
proposals in the same size and font in every quarterly and annual report -- is
in a form that may properly be brought before the meeting. If the proposal is
presented, the directors designated to vote the proxies will vote AGAINST the
proposal.
Except as noted above, Delta has not received proper notice, and is not
presently aware, of any business to be transacted at the annual meeting other
than as described in this proxy statement. If any other item or proposal
properly comes before the meeting (including, but not limited to, a proposal to
adjourn the meeting in order to solicit votes in favor of any proposal contained
in this proxy statement), the proxies received will be voted in accordance with
the discretion of the directors designated to vote the proxies.
PROPOSAL 1 -- ELECTION OF DIRECTORS
A Board of nine directors will be elected at the annual meeting. Each director
elected will hold office until the next annual meeting of shareowners and the
election of his or her successor. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE FOLLOWING NOMINEES:
Edward H. Budd, George M.C. Fisher, David R. Goode, Gerald Grinstein, James
M. Kilts, Leo F. Mullin, John F. Smith, Jr., Joan E. Spero and Andrew J.
Young.
All of the nominees were elected by the shareowners at the last annual meeting
of shareowners except Mr. Kilts, who was elected by the Board of Directors on
October 24, 2002.
James L. Broadhead retired from the Board of Directors on December 31, 2002,
after 11 years as a director. Mr. Broadhead served on the Audit Committee,
Benefit Funds Investment Committee, Corporate Governance Committee, Corporate
Strategy Committee and Executive Committee during 2002. Delta gratefully
acknowledges his outstanding service.
The Board of Directors believes that a substantial majority of its members
should be non-employee directors who have no significant financial or personal
ties to Delta, other than Common Stock ownership and the right to receive
compensation earned for serving as a director. The Board believes that all the
nominees meet this requirement except Mr. Mullin, who does not satisfy this
condition because he is an officer of Delta.
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The members of the Board of Directors provide Delta with a wide and valuable
range of judgment and experience from areas such as air and ground
transportation, banking, consumer products, digital technology, economics,
financial services, government and international affairs, insurance,
investments, international trade and manufacturing.
The Board of Directors believes each nominee for director will be able to stand
for election. If any nominee becomes unable to stand for election, the Board may
name a substitute nominee or reduce the number of directors. If a substitute
nominee is chosen, the directors designated to vote the proxies will vote FOR
the substitute nominee.
CERTAIN INFORMATION ABOUT NOMINEES
EDWARD H. BUDD was Chairman of the Board and Chief Executive Officer of The
Travelers Corporation from 1982 until his retirement in 1993, and was an
executive officer of that company from 1974 through 1993. He has been a director
of Delta since 1985. Mr. Budd is also a director of Verizon Communications. He
is a member of the American Academy of Actuaries and The Business Council, and a
Trustee of Tufts University. Age 69.
GEORGE M.C. FISHER was Chairman of the Board of Eastman Kodak Company from 1993
until his retirement in December 2000, and served as its Chief Executive Officer
from 1993 until December 1999. Before joining Eastman Kodak Company, Mr. Fisher
was an executive officer of Motorola, Inc., serving as Chairman and Chief
Executive Officer from 1990 through 1993, and Chief Executive Officer from 1988
to 1990. He has been a director of Delta since 1999. Mr. Fisher is also a
director of Eli Lilly & Company and General Motors Corporation. He is Chairman
of the National Academy of Engineering, a member of the President's Advisory
Committee for Trade Policy & Negotiations, and a member of The Business Council.
Age 62.
DAVID R. GOODE has been Chairman of the Board, President and Chief Executive
Officer of Norfolk Southern Corporation since 1992, and an executive officer of
that company since 1985. He has been a director of Delta since 1999. Mr. Goode
is also a director of Caterpillar, Inc., Georgia-Pacific Corporation, Norfolk
Southern Railway Company and Texas Instruments, Incorporated. He is a member of
The Business Council and The Business Roundtable. Age 62.
GERALD GRINSTEIN was non-executive Chairman of the Board of Agilent
Technologies, Inc. from August 1999 until November 2002. He serves as a
strategic advisor to Madrona Venture Fund, a Seattle-based venture fund, and is
a principal of Madrona Investment Group, L.L.C., a Seattle-based investment
company. He served as non-executive Chairman of Delta's Board of Directors from
August 1997 until October 1999. Mr. Grinstein was Chairman of Burlington
Northern Santa Fe Corporation (successor to Burlington Northern Inc.) from
September 1995 until his retirement in December 1995; an executive officer of
Burlington Northern Inc. and certain affiliated companies from April 1987
through September 1995; and Chief Executive Officer of Western Air Lines, Inc.
from 1985 through March 1987. He has been a director of Delta since 1987. He is
also a director of Agilent Technologies, Inc., PACCAR Inc., The Pittston Company
and Vans, Inc. Age 70.
JAMES M. KILTS has been Chairman of the Board of The Gillette Company since
January 2001, and has served as its Chief Executive Officer since February 2001.
He was President and Chief Executive Officer of Nabisco Group Holdings Corp.
from December 1999 until it was acquired in December 2000 by Philip Morris
Companies. Mr. Kilts was President and Chief Executive Officer of Nabisco
Holdings Corp. and Nabisco Inc. from January 1998 to December 1999. He was an
Executive Vice President, Worldwide Food of Philip Morris, from 1994 to
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1997, and served as President of Kraft from 1989 to 1994. He has been a director
of Delta since October 2002. Mr. Kilts is a director of The May Department
Stores Company and Whirlpool Corporation. He serves on the Board of Trustees of
Knox College, and is Chairman of the Advisory Council of the University of
Chicago Graduate School of Business, a director of International Executive
Service Corps, and Vice Chairman of the Grocery Manufacturers of America. Age
55.
LEO F. MULLIN has been Chairman of Delta's Board of Directors since October
1999, and has served as Delta's Chief Executive Officer since August 1997. Mr.
Mullin was Vice Chairman of Unicom Corporation and its principal subsidiary,
Commonwealth Edison Company, from 1995 to August 1997. He was an executive of
First Chicago Corporation from 1981 to 1995, serving as that company's President
and Chief Operating Officer from 1993 to 1995. He has been a director of Delta
since 1997. Mr. Mullin is also a director of BellSouth Corporation and Johnson &
Johnson. He is a member of the Board of the Air Transport Association of America
and past Chairman of the International Air Transport Association. He is also a
member of The Business Council and The Business Roundtable. Age 60.
JOHN F. SMITH, JR. has been Chairman of the Board of Directors of General Motors
Corporation since 1996, and served as its Chief Executive Officer from November
1992 until June 2000. He was also President of General Motors Corporation from
April 1992 until October 1998, and President and Chief Operating Officer from
April 1992 until November 1992. He has been a director of Delta since 2000. Mr.
Smith is also a director of Hughes Electronics Corporation and The Procter &
Gamble Company. He is a member of the Board of The Nature Conservancy. Mr. Smith
is also a member of The Business Council and the U.S.-Japan Business Council.
Age 65.
JOAN E. SPERO has been President of the Doris Duke Charitable Foundation since
1997. She was U.S. Undersecretary of State for Economic, Business & Agricultural
Affairs from 1993 through 1996, and an executive of American Express Company
from 1981 through 1993. She has been a director of Delta since January 2002. Ms.
Spero is also a director of First Data Corporation. She is a trustee of the
Brookings Institution, Columbia University, the Council on Foreign Relations and
the Wisconsin Alumni Research Foundation. Age 58.
ANDREW J. YOUNG has been Chairman of the Board and a senior partner of GoodWorks
International, Inc. since January 1997. He was Vice Chairman of Law Companies
Group, Inc. from 1993 to January 1997, and Chairman of Law Companies
International Group, Inc. from 1990 to 1993. Mr. Young was Mayor of the City of
Atlanta, Georgia from 1982 to 1990; United States Ambassador to the United
Nations from 1977 to 1979; and a member of the House of Representatives of the
United States Congress from 1973 to 1977. He has been a director of Delta since
1994. Mr. Young is also a director of Archer Daniels Midland Company, Cox
Communications, Inc. and Thomas Nelson, Inc. He is Chairman of the Southern
Africa Enterprise Development Fund, and a director of the Atlanta Market Center
and the Martin Luther King, Jr. Center. He was Co-Chairman of the Atlanta
Committee for the Olympic Games and a member of the Board of the United States
Olympic Committee. Age 71.
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors holds regular meetings four times a year, schedules
special meetings when required and regularly meets in executive session without
management. These executive sessions are chaired by Mr. Grinstein in his role as
Chairman of the Executive Committee. The Board and its committees also meet
informally from time to time. During 2002, the Board held a
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total of nine meetings. Each director attended at least 80% of the meetings of
the Board of Directors and the committees on which he or she served.
The Board of Directors believes that sound corporate governance practices
provide an important framework in assisting the Board to discharge its
responsibilities. Accordingly, the Board has adopted corporate governance
principles relating to its functions, structure and operations. These principles
are available on Delta's website at:
www.delta.com/inside/investors/corp_info/
corp_governance/corp_principles/index.jsp.
The Board is reviewing the corporate governance principles in light of the rules
recently adopted by the Securities and Exchange Commission under the
Sarbanes-Oxley Act and the proposed corporate governance listing standards
issued by the New York Stock Exchange.
The Board of Directors has established the following committees to assist it in
discharging its responsibilities:
AUDIT COMMITTEE
The Audit Committee's responsibilities include:
- assisting the Board in its oversight of Delta's financial statements and
the independent audit of those statements;
- recommending to the Board the independent auditors and assisting the
Board in evaluating the independent auditors; and
- assisting the Board in its oversight of Delta's accounting and financial
reporting principles and policies and internal controls and procedures.
The Audit Committee members are George M.C. Fisher, Chairman, Joan E. Spero and
Andrew J. Young. This committee met seven times during 2002.
BENEFIT FUNDS INVESTMENT COMMITTEE
The Benefit Funds Investment Committee acts as the fiduciary for managing the
investment policies and assets of certain of Delta's benefit plans.
The Benefit Funds Investment Committee members are Andrew J. Young, Chairman,
John F. Smith, Jr. and Joan E. Spero. This committee met three times during
2002.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee's responsibilities include:
- serving as a nominating committee that:
- recommends candidates for election as directors; and
- considers shareowner nominations of candidates for election as
directors (see page 50 for the process shareowners may use to submit
nominations).
- serving as a corporate governance committee that reviews and makes
recommendations to the Board concerning:
- qualifications and eligibility requirements for Board members;
- the Board's composition, organization and processes;
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- the type, function, size and membership of Board committees;
- evaluation of the Board;
- Board compensation; and
- other corporate governance issues.
The Corporate Governance Committee members are John F. Smith, Jr., Chairman,
Gerald Grinstein, and Andrew J. Young. This committee met three times during
2002.
CORPORATE STRATEGY COMMITTEE
The Corporate Strategy Committee reviews Delta's long-term strategic goals,
objectives and plans, and makes recommendations to management and the Board of
Directors on these subjects.
The Corporate Strategy Committee members are Gerald Grinstein, Chairman, Edward
H. Budd, David R. Goode and George M.C. Fisher. This committee did not meet
during 2002 because the Board of Directors regularly discussed Delta's
strategies at meetings of the full Board.
EXECUTIVE COMMITTEE
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings.
The Executive Committee members are Gerald Grinstein, Chairman, Edward H. Budd,
George M.C. Fisher, David R. Goode, John F. Smith, Jr. and Andrew J. Young. This
committee did not meet during 2002.
FINANCE COMMITTEE
The Finance Committee reviews Delta's financial planning and financial
structure, funds requirements, and borrowing and dividend policies.
The Finance Committee members are David R. Goode, Chairman, Edward H. Budd,
George M.C. Fisher and Gerald Grinstein. This committee met four times during
2002.
PERSONNEL & COMPENSATION COMMITTEE
The Personnel & Compensation Committee's responsibilities include:
- reviewing and recommending to the Board:
- the election of Delta's officers;
- the compensation for and evaluation of the Chief Executive Officer;
- management succession planning; and
- the overall policy of Delta's benefit plans for non-executive
personnel.
- setting the salaries for officers above the level of Senior Vice
President except the Chief Executive Officer; and
- administering Delta's 2000 Performance Compensation Plan.
The Personnel & Compensation Committee members are Edward H. Budd, Chairman,
George M.C. Fisher, David R. Goode and Gerald Grinstein. This committee met
seven times during 2002.
8
COMPENSATION OF DIRECTORS
ANNUAL RETAINER, MEETING FEES AND TRANSPORTATION PRIVILEGES
Directors who are not employees of Delta receive an annual retainer of $25,000,
$5,000 of which is paid in shares of Common Stock; $1,000 for each Board and
Committee meeting attended; reimbursement for expenses in attending meetings;
and complimentary transportation privileges on Delta for themselves and their
spouses. The Chairman of each Committee also receives an annual retainer of
$7,500. Directors who are employees of Delta are not separately compensated for
their service as a director.
Non-employee directors may elect to receive all or a portion of their cash
compensation earned as a director in shares of Common Stock. Non-employee
directors may also defer their cash compensation to a date they specify, and
choose an investment return on the deferred amount from among the investment
return choices available under the Delta Family-Care Savings Plan, including the
Delta Common Stock Fund which is invested primarily in Common Stock. For
information about the Delta Family-Care Savings Plan, please see pages 3 through
4 of this proxy statement.
ANNUAL STOCK OPTION GRANT
Non-employee directors receive an annual award of non-qualified stock options
which in prior years had a Black-Scholes value of $40,000 on the grant date. In
2002, however, the Board determined it was appropriate to grant each
non-employee director a stock option to purchase the same number of shares as
the stock option granted to each eligible director in 2001, even though this
reduced the value of that annual award to approximately $16,100.
During 2002, each non-employee director received a stock option to purchase
3,355 shares of Common Stock at a price of $10.53 per share, the closing price
of the Common Stock on the New York Stock Exchange on the grant date. These
stock options generally become exercisable with respect to 25% of the covered
shares on each of the first four anniversaries of the grant date, and expire on
the tenth anniversary of the grant date. Upon the occurrence of a Change in
Control (as defined), the stock options immediately vest for their remaining
terms.
OTHER COMPENSATION
Non-employee directors who first join the Board after January 1, 2003 will
receive $10,000 of Common Stock when they are initially elected.
Non-employee directors who first join the Board after October 24, 1996 also
receive a deferred payment of $6,300 during each year in which they serve as a
director. The deferred amount earns an investment return equivalent to the
investment return on the Delta Common Stock Fund, and will be paid to directors
after they complete their Board service.
Directors who first joined the Board on or before October 24, 1996, and who
retire from the Board, may be elected advisory directors for a term which varies
depending on the director's term of Board service and age at retirement.
Advisory directors receive an annual retainer equal to the annual retainer paid
to non-employee directors at the time of their retirement. On October 24, 1996,
the Board discontinued the advisory director program for all future directors
who were not members of the Board on that date.
Non-employee directors who retire from the Board at or after age 68 with at
least five years of service as a director, directors who serve until their
mandatory retirement date, and lifetime
9
advisory directors, receive during their lives complimentary transportation
privileges on Delta for themselves and their spouses.
CHARITABLE CONTRIBUTION PROGRAM
Delta's charitable contribution program permits eligible directors to recommend
up to five tax-exempt organizations to receive donations totaling $1 million
after the director's death. Donations are made by a charitable foundation funded
by Delta. Recommended beneficiaries are subject to the approval of the Corporate
Governance Committee. In the event of a Change in Control (as defined) of Delta,
the program may not be amended or terminated, and Delta will be required to
purchase and place in trust insurance policies to fund the recommended
donations. On July 28, 1994, the Board discontinued this program for all future
directors who were not members of the Board on that date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel & Compensation Committee are Mr. Budd, who serves
as Chairman, and Messrs. Fisher, Goode and Grinstein. Mr. Grinstein was an
executive officer of Western Air Lines, Inc. from 1985 through March 1987.
Western became a wholly owned subsidiary of Delta on December 18, 1986, and was
merged into Delta on April 1, 1987.
BENEFICIAL OWNERSHIP OF SECURITIES
BENEFICIAL OWNERS OF MORE THAN 5% OF VOTING STOCK
The following table sets forth the holdings of the only persons known to Delta
to beneficially own more than five percent of any class of Delta's outstanding
voting securities.
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL CLASS ON
OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP FEBRUARY 28, 2003
PRIMECAP Management Company Common Stock 15,428,733(1) 12.5%
225 South Lake Ave., Suite 400
Pasadena, CA 91101-3005
FMR Corporation Common Stock 9,012,973(2) 7.3%
82 Devonshire Street
Boston, MA 02109
Fidelity Management Trust Company ESOP Preferred Stock 6,025,253(3) 100.0%
82 Devonshire Street Common Stock 15,475,363(3) 12.5%
Boston, MA 02109
(1) Based on a Schedule 13F filed February 14, 2003, in which PRIMECAP
Management Company ("PRIMECAP") reported that, as of December 31, 2002, it
had sole voting power over 2,550,893 of such shares, shared voting power
over none of such shares and sole investment discretion over all 15,428,733
of such shares. PRIMECAP has informed Delta that, at December 31, 2002,
9,464,700 of such shares were held by the Vanguard PRIMECAP Fund, which is
managed by PRIMECAP. In Amendment No. 5 to its Schedule 13G filed February
24, 2003, the Vanguard PRIMECAP Fund, 100 Vanguard Blvd., Malvern, PA 19355,
reported that it had sole voting power over all 9,464,700 of such shares,
shared voting power over none of such shares, and neither sole nor shared
dispositive power over any of such shares.
(2) Based on Amendment No. 3 to Schedule 13G filed February 13, 2003, in which
FMR Corp. and certain affiliates reported that, as of December 31, 2002, FMR
Corp. and certain affiliates had sole voting power over 535,723 of such
shares, shared voting power over none of such shares and sole dispositive
power over all 9,012,973 of such shares.
(3) These shares are held by Fidelity Management Trust Company as trustee of the
Delta Family-Care Savings Plan. See pages 3 through 4 of this proxy
statement for information about the Savings Plan.
10
DIRECTORS, NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Delta Common Stock and,
if applicable, ESOP Preferred Stock beneficially owned as of February 28, 2003,
by each director and director-nominee, each executive officer listed in the
Summary Compensation Table in this proxy statement, and all directors and
executive officers as a group. Unless otherwise indicated by footnote, the owner
exercises sole voting and investment power over the shares.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP(1)
Edward H. Budd Common Stock 28,616(2)(3)
George M.C. Fisher Common Stock 10,458(2)(4)
David R. Goode Common Stock 5,247(2)(4)
Gerald Grinstein Common Stock 10,271(2)(5)
James M. Kilts Common Stock 2,400(4)
Leo F. Mullin Common Stock 1,632,436(2)(6)
ESOP Preferred Stock 23
John F. Smith, Jr. Common Stock 6,786(2)(4)
Joan E. Spero Common Stock 4,839(4)
Andrew J. Young Common Stock 12,735(2)
Frederick W. Reid Common Stock 454,337(2)
ESOP Preferred Stock 60
M. Michele Burns Common Stock 224,718(2)(7)
ESOP Preferred Stock 44
Vicki B. Escarra Common Stock 337,158(2)
ESOP Preferred Stock 206
Robert L. Colman Common Stock 391,125(2)
Directors and Executive Officers Common Stock 3,121,126(2)(3)(6)(7)
as a Group (13 Persons) ESOP Preferred Stock 333
(1) The directors and executive officers as a group beneficially owned 2.5% of
the outstanding shares of Common Stock. Other than Mr. Mullin, who
beneficially owned 1.3% of the Common Stock, no person listed in the table
beneficially owned 1% or more of the outstanding shares of Common Stock or
ESOP Preferred Stock.
(2) Includes the following number of shares of Common Stock which the director
or executive officer has the right to acquire upon the exercise of stock
options that were exercisable as of February 28, 2003, or that will become
exercisable within 60 days after that date:
NAME NUMBER OF SHARES NAME NUMBER OF SHARES
Mr. Budd 5,415 Mr. Young 5,415
Mr. Fisher 3,415 Mr. Reid 444,200
Mr. Goode 3,415 Ms. Burns 199,675
Mr. Grinstein 5,415 Ms. Escarra 314,675
Mr. Mullin 1,580,700 Mr. Colman 360,375
Mr. Smith 1,915 Total 2,924,615
(3) Includes 10,647 shares of Common Stock attributable to Mr. Budd due to his
selection of the Delta Common Stock Fund investment return choice for
deferred cash compensation earned as a director. See page 9 of this proxy
statement for additional information regarding this program.
11
(4) Excludes the following number of shares of Common Stock attributable to the
designated director due to the annual deferred payment of $6,300 under the
deferred compensation arrangement for directors who first join the Board of
Directors after October 24, 1996: Mr. Fisher -- 1,131 shares; Mr.
Goode -- 580 shares; Mr. Kilts -- 599 shares; Mr. Smith -- 1,016 shares; and
Ms. Spero -- 791 shares. The deferred amount earns an investment return
equivalent to the investment return on the Delta Common Stock Fund, and will
be paid to the directors after they complete their Board service. See page 9
of this proxy statement for additional information regarding this program.
(5) Excludes a total of 23,000 deferred shares of Common Stock which the Board
of Directors granted to Mr. Grinstein in prior years in recognition of his
special service to the Board and Delta as a director, and 274 additional
deferred shares earned through the reinvestment of dividend equivalents on
these shares. Mr. Grinstein may not vote or dispose of these shares until
they are issued to him after he completes his Board service.
(6) Excludes restricted stock units covering 150,000 shares of Common Stock
granted to Mr. Mullin on November 29, 2002 in connection with the five year
renewal of his employment agreement. The award will vest only if Mr. Mullin
remains at Delta until December 31, 2007 or an earlier Change in Control
occurs. Mr. Mullin may not vote or dispose of the shares of Common Stock
covered by the award until the award vests.
(7) Includes 7,246 shares of unvested restricted stock over which Ms. Burns had
voting power, but not investment power, as of February 28, 2003.
PERSONNEL & COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Personnel & Compensation Committee of the Board of Directors consists
entirely of non-employee directors who are independent of Delta. This report
discusses the Committee's overall objectives in designing Delta's executive
compensation program. It then provides the context for the Committee's executive
compensation decisions in 2002 in view of the extraordinary circumstances Delta
faced during the year. This report also reviews the Committee's compensation
determinations in 2002 for the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table on page 21 of this proxy
statement.
OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The Committee's primary objective is to have an executive compensation program
that attracts, motivates and retains talented executives to work for the
long-term advantage of Delta's primary stakeholder groups -- shareowners,
customers and employees. The Committee believes that an executive compensation
program designed and administered with a clear and strong link to Delta's
business strategy and long-term goals, and to shareowner returns, will
accomplish this objective.
Consistent with this philosophy, the Committee has structured the executive
compensation program to:
- Sustain Delta's ability to attract and retain a group of highly qualified
and experienced executives by providing a competitive total compensation
package;
- Provide Delta's executives with compensation opportunities tied to
financial and operating goals and to the execution of Delta's near- and
long-term business objectives;
- Emphasize at-risk pay by tying a substantial portion of executives'
compensation to results achieved; and
- Closely link the long-term interests of Delta's executives to those of
shareowners by having stock-based compensation comprise a significant
portion of total pay opportunities.
Delta competes for executives with companies both inside and outside the airline
industry. Accordingly, the Committee regularly compares Delta's total executive
compensation program opportunities and components to those in place at other
major U.S. airlines and at a cross-
12
section of well-regarded companies in general industry. For this reason, the
relevant market for pay comparisons is broader than the airline peer companies
which comprise the industry index in the Stock Performance Graph shown elsewhere
in this proxy statement. The Committee has retained an executive compensation
consulting firm, which assists in evaluating and revising the executive
compensation program.
CONTEXT FOR EXECUTIVE COMPENSATION ACTIONS IN 2002
The September 11, 2001 terrorist attacks have caused unprecedented financial and
operational challenges for the airline industry. While many sectors of the
nation's economy were adversely impacted by those events, airlines were
disproportionately affected, as traffic and revenues declined dramatically and
aviation security costs and war and terrorism risk insurance premiums increased
significantly. These challenges continued throughout 2002 as some airlines
approached -- and, in the case of two major carriers, entered -- bankruptcy.
In this context, the Committee concluded that its first priority must be to
maintain a highly qualified management team capable of responding effectively to
the extraordinary challenges facing Delta and the airline industry. Moreover,
the Committee recognized that these challenges would likely continue for some
time. This would make it difficult to retain key members of management who could
be recruited by companies in other industries offering opportunities involving
less risk and greater compensation. Therefore, in order to strengthen Delta's
ability to retain the existing management team, the Committee took the actions
discussed below.
SPECIAL RETENTION PROGRAM
In January 2002, the Committee adopted a special retention program ("2002
Retention Program") to assist Delta in retaining key members of management. Each
participant in this program, including the persons named in the Summary
Compensation Table, received a contingent cash retention award tied to his or
her then current base salary. Subject to remaining employed by Delta throughout
2003 and 2004, respectively, participants will receive 33% of their awards in
January 2004 and the remaining 67% in January 2005. If Delta's EBITDAR Margin
for the two-year period ending December 31, 2003 is at or above the median of a
designated airline peer group, the second payment will be accelerated to early
2004 for participants who remain employed by Delta throughout 2003. The
Committee selected EBITDAR Margin as an appropriate measure in this context
because it is an indicator of an airline's efficiency in generating cash flow
from revenues, and is widely used to compare the performance of different
companies.
For additional information about the 2002 Retention Program, please see
"Long-Term Incentive Plans -- Awards in Last Fiscal Year" on page 24 of this
proxy statement.
FUNDING DELTA'S NON-QUALIFIED RETIREMENT PLAN
The security of retirement benefits is an important concern of employees at all
levels. This concern is addressed for the large majority of Delta's employees
through funded pension plans that are qualified under the Internal Revenue Code
("IRC"). The IRC limits the benefits that can be paid from a qualified
retirement plan. These limits do not affect most employees. For higher paid
employees, including most officers, however, the IRC limits result in a
significant portion of their retirement benefits being paid under an unfunded,
non-qualified retirement plan. Unlike a qualified plan, benefits from an
unfunded non-qualified plan could be completely lost if the company files for
bankruptcy.
13
The events of September 11, 2001 demonstrated that unprecedented actions outside
Delta's control could result in the complete loss of these earned retirement
benefits. Delta's business plans reduce this risk by cutting costs, preserving
liquidity, and improving revenue. Nevertheless, the business environment
presents ongoing risks and creates a significant concern for retention of
management personnel.
Therefore, in January 2002, the Committee approved funding of trusts to secure
the after-tax non-qualified retirement benefits of 33 management personnel,
including the persons named in the Summary Compensation Table. The contributions
made in 2002 secured 60% of the present value of each participant's after-tax
non-qualified retirement benefits earned through December 31, 2001, and also
included an amount sufficient to pay all taxes resulting from these
contributions. To further enhance the retention value of this program, funding
of the balance of the present value of the then earned non-qualified retirement
benefit will occur in 2003 and 2004 for participants who remain active employees
of Delta. These actions are not designed to increase the retirement benefits
payable to these employees, but rather to provide security for the payment of
already earned retirement benefits under the non-qualified plan. Contributions
to these trusts after 2004 are subject to the Committee's discretion.
For additional information about this subject, please see "Supplemental
Executive Retirement Plans" on pages 25 through 26 of this proxy statement.
RENEWAL OF MR. MULLIN'S EMPLOYMENT AGREEMENT
Mr. Mullin has made many contributions to Delta's progress since joining Delta
in 1997. Moreover, his strong leadership and vision have been essential in
steering Delta through the considerable difficulties the airline industry has
faced since September 11, 2001. Due to the industry's ongoing challenges as well
as Mr. Mullin's key role in leading Delta's management team, the Board of
Directors and the Committee are highly committed to retaining Mr. Mullin's
services. Consequently, the Board and the Committee are pleased that, on
November 29, 2002, Delta and Mr. Mullin entered into a renewal of Mr. Mullin's
employment agreement pursuant to which Mr. Mullin has agreed to serve as Delta's
Chief Executive Officer through December 31, 2007. The renewed agreement is
designed to retain Mr. Mullin for the entire employment period. Therefore, Mr.
Mullin will realize benefits from stock-based awards granted under the agreement
only if he remains at Delta until December 31, 2007 or an earlier Change in
Control occurs. The value of these benefits depends solely upon Delta's
long-term stock performance.
For additional information regarding the renewal of Mr. Mullin's employment
agreement, please see "Employment Agreements with Executive Officers" on pages
28 through 29 of this proxy statement.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
In 2002, Delta continued to provide executive compensation opportunities
through:
- Base Salary;
- Annual Incentives; and
- Long-term Incentives.
The Committee emphasizes performance-based programs, the value of which depends
in large part upon Delta's stock performance. Each of these components,
including the Committee's actions in 2002, is discussed below.
14
BASE SALARY
Base salary is a key element of Delta's executive compensation program.
Consistent with the Committee's emphasis on closely linking executive pay with
Delta's results, salary represents a smaller component of an executive officer's
total compensation than either the annual or the long-term incentive
compensation opportunities discussed below.
The Committee approves salaries for executive officers other than the Chief
Executive Officer, and recommends the Chief Executive Officer's salary to the
Board of Directors for its approval. The Committee establishes salaries for
executive officers at levels that are comparable to similar executive positions
at other major U.S. airlines and the broader comparator group described above.
Specifically, salaries for executive officers are targeted at the 50th
percentile of the comparative market. Actual salary levels are based on a
combination of factors that includes the executive's performance,
responsibilities and experience as well as Delta's circumstances.
In the 2002 business environment, the Committee concluded that there should be
no salary increase for executive officers except to recognize increased
responsibilities. Consistent with this determination, the Committee raised Ms.
Burns' base salary to reflect her increased responsibilities in her key role as
Chief Financial Officer. No other executive officer received a salary increase
in 2002.
In early 2003, the Board of Directors accepted management's recommendation to
reduce the base salaries for all officers for an indefinite period. Accordingly,
effective March 1, 2003, the salaries for Messrs. Mullin and Reid were reduced
10%, and the salaries of all other officers were reduced 8%. These reductions
demonstrate the commitment of the officer team to share the burden of Delta's
cost reduction goals.
ANNUAL INCENTIVES
The annual incentive component of the executive compensation program links pay
and performance by providing a cash compensation opportunity to participants
based on Delta's achieving annual performance goals that are established by the
Committee consistent with the business plan. The Committee adjusts these award
opportunities periodically based on competitive data provided by its executive
compensation consulting firm. Delta's target for total annual cash compensation
(base salary plus annual incentive) for executive officers is at the 55th
percentile of the market.
In January 2002, the Committee established the annual incentive opportunities
for 2002 based on Delta's achieving specific financial goals, effectiveness and
efficiency objectives and key initiatives that were specifically linked to the
difficult business environment. The Committee placed particular emphasis on
Delta's free cash flow and its EBITDAR Margin ranking relative to Delta's major
competitors. The effectiveness and efficiency objectives and key initiatives
focused on other significant areas such as safety, customer service, cost
controls, low fare competition, the aircraft fleet and human resources,
including diversity and labor relations.
To strengthen the retention elements of the annual incentive program in light of
the serious impact of the events of September 11, 2001 on Delta and the airline
industry, the Committee decided in January 2002 that eligible participants would
receive a minimum payout at the threshold level (50% of the target award), with
one-half of that amount to be paid in July 2002 and the balance in January 2003.
In designing this approach to the annual incentive for 2002, the Committee
recognized that, consistent with management's recommendation, no annual
incentive
15
awards had been paid for 2001 even though the Committee believes management
responded exceedingly well to the many challenges Delta faced in 2001.
Overall, during 2002, Delta exceeded the established performance targets,
despite a deteriorating business environment. The Committee believes that
achievement of these goals enabled Delta to outperform most of its competitors.
Accordingly, in January 2003, the Committee approved payments to participants in
the annual incentive program in accordance with the terms established at the
beginning of 2002.
LONG-TERM INCENTIVES
The potential value of long-term incentive opportunities comprises the largest
portion (65% or more) of the targeted total compensation package for executive
officers. The Committee believes this approach to total compensation
opportunities provides the appropriate focus for those executives who are
charged with the greatest responsibility for managing Delta and achieving
success for Delta's stakeholders. Specific long-term incentive award guidelines
vary by level of responsibility. Awards are made under a plan that permits the
Committee to grant stock options, restricted stock, other stock-based awards and
cash. Award types vary from year to year at the Committee's discretion.
During 2002, the Committee continued to apply its long-term incentive plans by:
- granting non-qualified stock options to officers and selected other
employees in January 2002;
- granting other long-term incentive awards to officers in July 2002. At
the end of the performance cycle on December 31, 2004, participants may
earn nothing, or a payout in cash and shares of Delta Common Stock
ranging from 50% to 250% of the target award, based on Delta's cash flow
return on investment relative to a designated peer group of U.S.
airlines; and
- approving the payout of awards earned from previously granted target
awards of performance-based stock units following the close of the
three-year performance cycle that ended on June 30, 2002. These awards,
which were paid in shares of Delta Common Stock, were based on Delta's
ranking relative to its peer domestic airlines with respect to specified
performance measures.
The Committee uses the Black Scholes option pricing model to determine the
number of stock options granted to participants. In making stock option and
other long-term incentive awards, the Committee may apply its judgment to adjust
the size of an award based on individual performance, contribution to Delta's
success and other factors.
In October 2002, the Committee was considering whether Delta should conduct a
stock option exchange program for eligible employees. To preserve Delta's
flexibility to conduct this program in 2003 in accordance with applicable
accounting rules, and to provide executives with incentive and retention value
lacking in outstanding stock options that were severely underwater, the
Committee accelerated the annual award of stock options that normally would have
occurred in January 2003. The Board of Directors recently adopted, subject to
shareowner approval, amendments to Delta's management and broad-based employee
equity compensation plans to authorize a stock option exchange program.
16
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During 2002, Mr. Mullin's base salary continued to be $795,000, the level
established on August 1, 2000. Mr. Mullin decided to forego his salary from
October 1, 2001 through December 31, 2001 to emphasize the need for Delta to
reduce its costs after the events of September 11, 2001, and in recognition of
the sacrifices made by Delta employees during that period. Like other members of
management, Mr. Mullin did not receive any payment under the annual incentive
program for 2001. Effective March 1, 2003, Mr. Mullin reduced his salary by 10%
for an indefinite period to demonstrate his commitment to share the burden of
Delta's cost reduction goals.
During 2002, following its normal practice, the Committee awarded Mr. Mullin
non-qualified stock options covering 275,000 shares of Delta Common Stock. The
Committee also granted Mr. Mullin a long-term incentive target award of 112,900
shares of Delta Common Stock and $1.9 million in cash; the payout, if any, from
this award will occur in 2005 based on Delta's performance during the period
beginning July 1, 2002 and ending December 31, 2004. As discussed above, in
October 2002, the Committee accelerated the annual award of stock options that
normally would have occurred in January 2003. At that time, the Committee
awarded Mr. Mullin's non-qualified stock options covering 238,000 shares of
Delta Common Stock.
Each of the awards outlined in the previous paragraph was made under the
programs described above which are applicable to other executive officers. In
determining the size of Mr. Mullin's awards, the Committee considered the pay
practices of other major U.S. airlines and the general industry companies
described earlier in this report, and other factors mentioned above, as well as
Mr. Mullin's performance and his contributions to Delta's overall results.
Following the close of the three-year performance cycle that ended on June 30,
2002, the Committee approved the payout of the award earned by Mr. Mullin from
the target award of performance-based stock units granted to him in 1999. Based
on Delta's performance, Mr. Mullin received 23,400 shares of Delta Common Stock.
The Committee awarded Mr. Mullin an annual incentive compensation award of
$1,401,188 based on Delta's performance in 2002 as measured against the goals
established by the Committee. The Committee believes that, in the aftermath of
September 11, 2001 and throughout 2002, Mr. Mullin distinguished Delta and
himself in demonstrating strong leadership in an industry faced with
unprecedented challenges.
As discussed earlier, on November 29, 2002, Delta and Mr. Mullin entered into a
renewal of Mr. Mullin's employment agreement covering his continued employment
with Delta through December 31, 2007. For additional information about this
agreement, please see "Employment Agreements with Executive Officers" on pages
28 through 29 of this proxy statement.
CHIEF EXECUTIVE OFFICER PERFORMANCE EVALUATION
During 2002, the Board of Directors continued the formal process by which this
Committee conducts an annual evaluation of the Chief Executive Officer's
performance that involves a written assessment from all directors. The
evaluation reviews the Chief Executive Officer's performance in areas such as
strategic planning, financial matters, leadership, management succession and
development, human resources and government and community relations. The
Committee discussed the results of this evaluation with the Board in January
2003.
17
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits to $1 million the
annual corporate federal income tax deduction for compensation paid by a public
company to its chief executive officer or any of its four other highest paid
officers. The $1 million limit does not apply to "performance based
compensation," as defined in the rules adopted under Section 162(m). The
Committee has carefully considered Delta's executive compensation program in
light of the applicable rules, and believes that compliance with those rules
generally is in Delta's best interests. Accordingly, the material terms of the
plan under which both the annual and long-term incentive awards are provided
have been approved by Delta's shareowners. The Committee may make exceptions to
this practice when it determines that doing so will better support Delta's
compensation policies or its business strategy and long-term goals. During 2002,
as part of its management retention efforts, the Committee exercised this
discretion with respect to certain executive compensation actions.
Respectfully submitted,
THE PERSONNEL & COMPENSATION COMMITTEE
Edward H. Budd, Chairman
George M.C. Fisher
David R. Goode
Gerald Grinstein
18
EXECUTIVE COMPENSATION
INFORMATION ABOUT SUMMARY COMPENSATION TABLE
The Summary Compensation Table contains information about the compensation
earned by Delta's Chief Executive Officer and its four other most highly
compensated executive officers during 2002. A discussion of certain aspects of
the Summary Compensation Table follows. Additional information is included in
the footnotes to the Summary Compensation Table.
Salary. The Board of Directors set Mr. Mullin's annual salary at $795,000 on
August 1, 2000. Mr. Mullin has not received a salary increase since that date.
Mr. Mullin decided to forego his salary from October 1, 2001 through December
31, 2001 to emphasize the need for Delta to reduce its costs following the
events of September 11, 2001, and in recognition of the sacrifices made by Delta
employees during that period. This action reduced Mr. Mullin's salary by
$198,750 during 2001.
During 2002, the Personnel & Compensation Committee increased Ms. Burns' salary
to reflect her increased responsibilities in her key role as Chief Financial
Officer. No other executive officer received a salary increase during 2002.
In early 2003, the Board of Directors accepted management's recommendation to
reduce the salaries of all officers for an indefinite period. Accordingly,
effective March 1, 2003, the salaries of Messrs. Mullin and Reid were reduced
10%, and the salaries of all other officers were reduced 8%. These reductions
demonstrate the commitment of the officer team to share the burden of Delta's
cost reduction goals.
Bonus. Delta's annual incentive program links pay and performance by providing
a cash compensation opportunity based on Delta's achieving performance goals
that are established by the Personnel & Compensation Committee consistent with
the business plan. The Bonus column in the Summary Compensation Table reports
the amounts paid under this program for the specified period.
The amounts reported in the Bonus column for 2002 are based on Delta's achieving
annual financial goals, effectiveness and efficiency objectives and key
initiatives that were specifically linked to the difficult business environment.
Consistent with management's recommendation, Delta did not pay incentive
compensation in 2001 due to the serious impact of the events of September 11,
2001 on Delta and the airline industry. The Personnel & Compensation Committee
accepted this recommendation even though it believes management responded
exceedingly well to the many challenges Delta faced in 2001.
Restricted Stock Award. On November 29, 2002, Delta and Mr. Mullin entered into
a five year renewal of Mr. Mullin's employment agreement. In consideration for
Mr. Mullin's entering into this agreement, the Personnel & Compensation
Committee granted Mr. Mullin restricted stock units covering 150,000 shares of
Common Stock. This award is designed to create a strong incentive for Mr. Mullin
to remain as Chief Executive Officer through the entire five year renewal period
and to further align Mr. Mullin's interests with those of Delta's shareowners.
The award will vest only if Mr. Mullin remains at Delta until December 31, 2007
or an earlier Change in Control occurs. The restricted stock units will be
forfeited if Mr. Mullin's employment with Delta terminates prior to the vesting
of the award.
19
Securities Underlying Options/SARS. In January 2002, following its normal
practice, the Personnel & Compensation Committee awarded non-qualified stock
options to officers, including the persons named in the Summary Compensation
Table, and selected other employees.
In October 2002, the Committee accelerated the annual award of non-qualified
stock options that normally would have occurred in January 2003. Accordingly,
officers, including the persons named in the Summary Compensation Table, and
selected other employees received a stock option award in October 2002. As
discussed in its Report on Executive Compensation in this proxy statement, the
Committee accelerated these awards to preserve Delta's flexibility to conduct a
stock option exchange program in 2003 in accordance with applicable accounting
rules, and to provide Delta executives with incentive and retention value
lacking in outstanding stock options that were severely underwater.
On November 29, 2002, the Committee granted Mr. Mullin non-qualified stock
options covering 450,000 shares of Common Stock in consideration of Mr. Mullin's
entering into a renewal of his employment agreement with Delta. These stock
options become exercisable only if Mr. Mullin remains at Delta until December
31, 2007 or an earlier Change in Control occurs, and are designed to create a
strong incentive for Mr. Mullin to remain as Delta's Chief Executive Officer
through the end of 2007 and to further align Mr. Mullin's interests with those
of Delta's shareowners.
See the "Option Grants in Last Fiscal Year" table, below, for details regarding
each of these grants.
LTIP Payouts. The LTIP Payouts column in the Summary Compensation Table reports
the amounts earned from previously granted target awards of performance-based
stock units. These payouts were (1) based on Delta's ranking relative to peer
domestic airlines with respect to specified performance measures during
particular three-year periods; and (2) made in shares of Common Stock. The
amount shown for each individual for a particular year is equal to the number of
shares of Common Stock received in that year multiplied by the fair market value
of one share of Common Stock on the date the payout was approved by the
Personnel & Compensation Committee.
20
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- -------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR(1) ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
--------------------------- ----------------------- ------- --------- ------------ --------- ------------ --------
Leo F. Mullin Year ended 12/31/02 795,000 1,401,188 11,165 2,025,000 963,000 456,066
Chairman of the Board Year ended 12/31/01 596,250 0 7,817 0 200,000 1,575,144
and Chief Executive 6 months ended 12/31/00 393,750 450,000 7,418 0 225,000 0
Officer Year ended 6/30/00 745,833 1,400,000 66,629 0 650,000 0
Frederick W. Reid Year ended 12/31/02 700,000 1,233,750 44,439 0 250,300 157,869
President and Chief Year ended 12/31/01 655,000 0 62,310 0 113,200 607,212
Operating Officer 6 months ended 12/31/00 280,417 217,500 5,317 0 47,400 0
Year ended 6/30/00 536,667 570,000 117,848 0 34,600 0
M. Michele Burns Year ended 12/31/02 560,000 846,000 12,790 0 182,600 63,148
Executive Vice President Year ended 12/31/01 530,000 0 5,187 0 74,000 192,384
and Chief Financial 6 months ended 12/31/00 249,375 196,400 4,485 0 27,200 0
Officer(8)
Vicki B. Escarra Year ended 12/31/02 540,000 761,400 11,373 0 172,900 138,574
Executive Vice Year ended 12/31/01 511,667 0 4,961 0 70,400 529,056
President and Chief 6 months ended 12/31/00 222,917 175,200 4,057 0 41,300 0
Marketing Officer Year ended 6/30/00 394,583 420,000 4,039 0 30,100 0
Robert L. Colman Year ended 12/31/02 440,000 542,850 5,101 0 114,700 138,574
Executive Vice Year ended 12/31/01 440,000 0 4,326 0 35,400 486,972
President -- 6 months ended 12/31/00 215,000 169,400 4,121 0 40,700 0
Human Resources Year ended 6/30/00 415,000 430,000 4,248 0 30,100 0
ALL OTHER
COMPEN-
SATION
NAME AND PRINCIPAL POSITION ($)(7)
--------------------------- ---------
Leo F. Mullin 73,669
Chairman of the Board 10,858
and Chief Executive 8,348
Officer 8,592
Frederick W. Reid 149,960
President and Chief 72,115
Operating Officer 9,384
70,629
M. Michele Burns 25,535
Executive Vice President 7,776
and Chief Financial 7,524
Officer(8)
Vicki B. Escarra 54,880
Executive Vice 7,512
President and Chief 7,965
Marketing Officer 7,746
Robert L. Colman 39,594
Executive Vice 5,068
President -- 4,638
Human Resources 4,781
(1) Effective December 31, 2000, Delta changed its year end from June 30 to
December 31. Accordingly, this table contains an extra line for the
six-month transition period that began July 1, 2000 and ended December 31,
2000.
(2) Represents the incentive compensation award, if any, for services rendered
during the specified period.
(3) Amounts for 2002 represent reimbursements for taxes related to (a) life
insurance arrangements; and (b) flight benefits.
(4) In connection with the renewal of Mr. Mullin's employment agreement, on
November 29, 2002, the Personnel & Compensation Committee granted Mr. Mullin
150,000 restricted stock units. The value of this award as shown in the
table is based on the $13.50 closing price of the Common Stock on the New
York Stock Exchange on the date the restricted stock units were granted to
Mr. Mullin. Mr. Mullin will receive notional dividends on his restricted
stock units to the same extent as dividends are paid on the Common Stock.
The notional dividends are subject to the same vesting and forfeiture
provisions as the restricted stock units.
At December 31, 2002, Mr. Mullin held restricted stock units covering
150,000 shares of Common Stock valued at $1,815,000, and Ms. Burns held
8,129 shares of restricted stock valued at $98,361. These values are based
on the $12.10 closing price of the Common Stock on the New York Stock
Exchange on December 31, 2002.
(5) Represents the number of shares of Common Stock subject to stock options
granted during the period. As explained above, the number of stock options
granted in 2002 reflects (a) the annual grant in January 2002; (b) the
acceleration to October 2002 of the annual grant that would have occurred in
January 2003; and (c) in Mr. Mullin's case, the stock option award granted
under his renewed employment agreement in November 2002. See the "Option
Grants in Last Fiscal Year" table, below, for details regarding each of
these grants.
(6) The amounts shown in the LTIP Payouts column for 2002 relate to Delta's
performance during the period that began July 1, 1999 and ended June 30,
2002. These amounts are based on a Common Stock fair market value of $19.49
per share on August 23, 2002, the date the payout was approved by the
Personnel & Compensation Committee.
The amounts shown in the LTIP Payouts column for 2001 relate to Delta's
performance during the period that began July 1, 1998 and ended June 30,
2001. These amounts are based on a Common Stock fair market value of $40.08
per share on August 24, 2001, the date the payout was approved by the
Personnel & Compensation Committee.
21
(7) For 2002, this column is comprised of the following items:
SUPPLEMENTAL
GROUP LIFE VALUE OF BENEFIT SAVINGS PLAN
INSURANCE OF SPLIT DOLLAR CONTRIBUTIONS OTHER
NAME PREMIUMS($) LIFE INSURANCE($)(a) ($) ($)
---- ----------- -------------------- ------------- --------
Leo F. Mullin 4,579 64,115 3,975 1,000(b)
Frederick W. Reid 4,032 78,928 4,000 63,000(c)
M. Michele Burns 3,110 19,725 2,700 0
Vicki B. Escarra 3,110 47,770 4,000 0
Robert L. Colman 2,535 37,059 0 0
(a) Represents the total of the term portion of the premium and the
actuarial value of the benefit of a split dollar life insurance
arrangement. Delta has a secured right to receive, from any proceeds of
the policy, reimbursement of all premiums paid prior to any payment to
the beneficiary. Because of the enactment of the Sarbanes-Oxley Act,
Delta will either terminate or amend these arrangements prior to the
next scheduled premium payment date.
(b) Represents legal fees paid on Mr. Mullin's behalf in connection with the
preparation of his renewed employment agreement.
(c) Represents the annual premium for an individual life insurance policy
which, pursuant to an agreement entered into with Mr. Reid when he
joined Delta, Delta agreed to pay through April 30, 2002.
(8) Ms. Burns became an executive officer of Delta during the six-month
transition period ended December 31, 2000. Accordingly, information
regarding her compensation for the year ended June 30, 2000 is not included.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding non-qualified stock
options granted during 2002 to the persons named in the Summary Compensation
Table. None of these grants included stock appreciation rights.
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------- -----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANT DATE GRANTED (#) FISCAL YEAR ($/SH)(1) DATE VALUE($)(2)
---- ---------- ----------- --------------- ----------- ---------- -----------
Leo F. Mullin 01/24/2002 275,000 3.26 32.02 01/23/2012 3,656,125
10/24/2002 238,000 2.82 10.53 10/23/2012 1,105,510
11/29/2002 450,000 5.33 13.50 11/28/2012 3,451,500
Frederick W. Reid 01/24/2002 123,400 1.46 32.02 01/23/2012 1,640,603
10/24/2002 126,900 1.50 10.53 10/23/2012 589,451
M. Michele Burns 01/24/2002 86,100 1.02 32.02 01/23/2012 1,144,700
10/24/2002 96,500 1.14 10.53 10/23/2012 448,243
Vicki B. Escarra 01/24/2002 86,100 1.02 32.02 01/23/2012 1,144,700
10/24/2002 86,800 1.03 10.53 10/23/2012 403,186
Robert L. Colman 01/24/2002 57,100 0.68 32.02 01/23/2012 759,145
10/24/2002 57,600 0.68 10.53 10/23/2012 267,552
(1) The exercise price is the closing price of the Common Stock on the New York
Stock Exchange on the grant date. Subject to certain exceptions, the stock
options granted on January 24, 2002 and October 24, 2002, become exercisable
with respect to 50% of the covered shares on each of the first two
anniversaries of the grant date.
On November 29, 2002, the Personnel & Compensation Committee granted Mr.
Mullin non-qualified stock options covering 450,000 shares of Common Stock
in consideration of Mr. Mullin's entering into a renewal of his employment
agreement with Delta. This award will become exercisable only if Mr. Mullin
remains at Delta until December 31, 2007 or an earlier Change in Control
occurs.
22
(2) The hypothetical grant date present value was determined using the
Black-Scholes option pricing model and, consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," includes the following material assumptions and adjustments:
DATE OPTIONS GRANTED
1/24/2002 BECOME EXPECTED INTEREST VOLATILITY DIVIDEND
EXERCISABLE OPTION TERM RATE(%)(a) RATE(%)(b) YIELD(%)(c)
-------------------- ----------- ---------- ---------- -----------
1/24/2003 6 years 4.65 33.124 0.31
1/24/2004 7 years 4.79 32.516 0.31
DATE OPTIONS GRANTED
10/24/2002 BECOME EXPECTED INTEREST VOLATILITY DIVIDEND
EXERCISABLE OPTION TERM RATE(%)(a) RATE(%)(b) YIELD(%)(c)
-------------------- ----------- ---------- ---------- -----------
10/24/2003 6 years 3.25 44.691 0.95
10/24/2004 7 years 3.54 42.931 0.95
DATE OPTIONS GRANTED
11/29/2002 BECOME EXPECTED INTEREST VOLATILITY DIVIDEND
EXERCISABLE OPTION TERM RATE(%)(a) RATE(%)(b) YIELD(%)(c)
-------------------- ----------- ---------- ---------- -----------
01/02/2008 10 years 4.05 46.363 0.74
(a) The interest rate represents the interest rate on a U.S. Treasury security
on the grant date with a maturity date corresponding to the expected option
term.
(b) The volatility rate is calculated using monthly Common Stock closing price
and dividend information for the period equal to the expected option term
that ended on the grant date.
(c) The dividend yield represents the Common Stock's current $0.10 per share
annualized dividend divided by the fair market value of the Common Stock on
the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth certain information regarding the number and
value of unexercised in-the-money stock options held at December 31, 2002 by the
persons named in the Summary Compensation Table. None of the persons named in
the Summary Compensation Table exercised any stock options during 2002. None of
the options reported in this table include stock appreciation rights.
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES UNDERLYING UNEXERCISED MONEY OPTIONS AT FY-
ACQUIRED ON VALUE OPTIONS AT FY-END(#) END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Leo F. Mullin 0 0 1,393,200 1,763,000 0 373,660
Frederick W. Reid 0 0 371,700 448,800 0 199,233
M. Michele Burns 0 0 130,209 273,291 0 151,505
Vicki B. Escarra 0 0 262,775 301,925 0 136,276
Robert L. Colman 0 0 322,975 197,925 0 90,432
(1) Value of unexercised in-the-money stock options at December 31, 2002, is
based on the $12.10 closing price of the Common Stock on the New York Stock
Exchange on December 31, 2002.
23
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table sets forth certain information regarding long-term incentive
award opportunities granted during 2002 to the persons named in the Summary
Compensation Table.
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, OTHER PERIOD NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#) OR PAYOUT (# OR $) (# OR $) (# OR $)
Leo F. Mullin $2,385,000(1) (1) $2,385,000 $2,385,000 $2,385,000
--------------------------------------------------------------------------------------------
112,900 shares (2) 56,450 shares 112,900 shares 282,250 shares
and $1,889,000(2) and $944,500 and $1,889,000 and $4,722,500
--------------------------------------------------------------------------------------------
Frederick W. Reid $1,925,000(1) (1) $1,925,000 $1,925,000 $1,925,000
--------------------------------------------------------------------------------------------
61,300 shares (2) 30,650 shares 61,300 shares 153,250 shares
and $1,025,000(2) and $512,500 and $1,025,000 and $2,562,500
--------------------------------------------------------------------------------------------
M. Michele Burns $1,350,000(1) (1) $1,350,000 $1,350,000 $1,350,000
--------------------------------------------------------------------------------------------
41,200 shares (2) 20,600 shares 41,200 shares 103,000 shares
and $689,000(2) and $344,500 and $689,000 and $1,722,500
--------------------------------------------------------------------------------------------
Vicki B. Escarra $1,350,000(1) (1) $1,350,000 $1,350,000 $1,350,000
--------------------------------------------------------------------------------------------
41,200 shares (2) 20,600 shares 41,200 shares 103,000 shares
and $689,000(2) and $344,500 and $689,000 and $1,722,500
--------------------------------------------------------------------------------------------
Robert L. Colman $1,100,000(1) (1) $1,100,000 $1,100,000 $1,100,000
--------------------------------------------------------------------------------------------
27,300 shares (2) 13,650 shares 27,300 shares 68,250 shares
and $457,000(2) and $228,500 and $457,000 and $1,142,500
(1) In January 2002, the Personnel & Compensation Committee adopted the 2002
Retention Program to assist Delta in retaining key members of management.
Each participant in this program, including the persons named in the Summary
Compensation Table, received a contingent cash retention award ranging from
125% to 300% of his or her then current base salary. Subject to remaining
employed by Delta throughout 2003 and 2004, respectively, participants will
receive 33% of their awards in January 2004 and the remaining 67% in January
2005. If Delta's EBITDAR Margin for the two-year period ending December 31,
2003 is at or above the median of a designated airline peer group, the
second payment will be accelerated to early 2004 for participants who remain
employed by Delta throughout 2003. The Committee selected EBITDAR Margin as
an appropriate measure in this context because it is an indicator of an
airline's efficiency in generating cash flow from revenues, and is widely
used to compare the performance of different companies.
If on or before December 31, 2003 a Change in Control (as defined) occurs
while a participant is employed by Delta, a pro rata portion of the
participant's contingent retention award will vest on the date of the Change
in Control. If during calendar 2004 a Change in Control occurs while a
participant is employed by Delta, any unvested portion of the participant's
contingent retention award will vest on the date of the Change in Control.
(2) The long-term incentive awards made in 2002 provide award opportunities for
officers, including the persons named in the Summary Compensation Table,
based on Delta's cash flow return on investment ranking relative to a
designated peer group of U.S. airlines. The target awards are denominated
50% in shares of Common Stock and 50% in cash. At the end of the performance
cycle, which began July 1, 2002 and ends December 31, 2004, participants may
earn nothing, or a number of shares and cash ranging from 50% to 250% of the
target award.
24
RETIREMENT PLANS AND OTHER AGREEMENTS
PENSION PLAN TABLE
The following table shows the estimated annual pension payable (before reduction
for Social Security benefits and not accounting for the limitations discussed
below) to a non-pilot employee, including the persons named in the Summary
Compensation Table, under the Delta Family-Care Retirement Plan ("Pension
Plan"), a non-contributory qualified defined benefit plan. The table assumes
that retirement occurs at December 31, 2002 at the normal retirement age of 65
after selected years of service. The benefits in the table would be paid in the
form of a joint and 50% survivor annuity.
FINAL AVERAGE 10 YEARS OF 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 OR MORE
EARNINGS SERVICE SERVICE SERVICE SERVICE YEARS OF SERVICE
------------- ----------- ----------- ----------- ----------- ----------------
$ 400,000 $ 80,000 $120,000 $ 160,000 $ 200,000 $ 240,000
800,000 160,000 240,000 320,000 400,000 480,000
1,200,000 240,000 360,000 480,000 600,000 720,000
1,600,000 320,000 480,000 640,000 800,000 960,000
2,000,000 400,000 600,000 800,000 1,000,000 1,200,000
2,400,000 480,000 720,000 960,000 1,200,000 1,440,000
2,800,000 560,000 840,000 1,120,000 1,400,000 1,680,000
For purposes of the Pension Plan, final average earnings are the average of an
employee's annual earnings, based on the employee's salary and eligible
incentive compensation awards for the 36 consecutive months in the 120-month
period immediately preceding retirement which produces the highest average
earnings. The annual pension benefit is determined by multiplying final average
earnings by 60%, and then reducing that amount for service of less than 30 years
and by 50% of the primary Social Security benefit payable to the employee. The
50% Social Security offset is reduced for service of less than 30 years with
Delta. For purposes of pension benefits under the Pension Plan and the
supplemental non-qualified retirement plans discussed below, the completed years
of service at February 28, 2003, for the persons named in the Summary
Compensation Table are as follows: Mr. Mullin -- 27 years, 6 months(1); Mr.
Reid -- 18 years, 4 months(2); Ms. Burns -- 18 years, 9 months(3); Ms.
Escarra -- 29 years, 5 months; and Mr. Colman -- 22 years, 4 months(1).
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Employees designated by the Personnel & Compensation Committee, including the
persons named in the Summary Compensation Table, are eligible to participate in
supplemental, non-
------------------------------
(1) Pursuant to their employment agreements, Messrs. Mullin and Colman received
an additional 22 years and 18 years, respectively, of service credit when
they completed three years and two years, respectively, of actual service
with Delta.
(2) Pursuant to his employment agreement, Mr. Reid received an additional 11
years of service credit when he completed three years of actual service with
Delta. Effective July 1, 2000, Mr. Reid began receiving an additional month
of service credit for each month of actual service.
(3) During her first five years of Delta employment, Ms. Burns is receiving an
additional 3.6 months of service credit for each month of actual service.
All additional service credit that would have been granted during this five
year period immediately vests if there is a Change in Control of Delta
during that period.
25
qualified retirement plans which provide benefits which may not be paid under
the Pension Plan due to limits on qualified plans established by the Internal
Revenue Code of 1986, as amended.
As discussed in its report on executive compensation contained elsewhere in this
proxy statement, in January 2002, the Personnel & Compensation Committee took
certain actions to increase the retention value of Delta's non-qualified
retirement benefit program. To accomplish this, the Committee approved
contributions to employee grantor trusts to secure non-qualified earned and
vested retirement benefits for 33 active executives. The action was designed to
provide the same after-tax benefit at retirement to covered executives as was
provided under the prior unfunded approach, and was not designed to increase a
participant's retirement benefit. Amounts held in these individual trusts will
offset the amounts that would otherwise be payable to these executives under
Delta's non-qualified retirement plans as well and certain individual agreements
described elsewhere in this proxy statement.
The funding of these trusts occurs over three years, with 60% of the present
value (as of December 31, 2001) of the executive's after-tax age 62
non-qualified retirement benefit (but based only on pay and service earned as of
December 31, 2001) being funded in 2002. An additional contribution will be made
in 2003 so that after such contribution, the amount in the executive's trust
will equal 80% of the present value (as of December 31, 2002) of the after-tax
age 62 non-qualified retirement benefit (but based on pay and service earned as
of December 31, 2002). Finally, a contribution will be made in 2004 so that
after such contribution, the amount in the executive's trust will equal 100% of
the present value (as of December 31, 2003) of the after-tax age 62
non-qualified retirement benefit (but based on pay and service earned as of
December 31, 2003). Present value for this purpose is based on discount and tax
rates and other assumptions approved by the Committee. All contributions include
amounts necessary to pay taxes resulting from the contribution. Contributions to
be made in 2003 and 2004 will be accelerated if there is a Change in Control of
Delta. Contributions to these trusts after 2004 are discretionary with the
Committee.
As a result of the changes described above, all non-qualified retirement
benefits will be payable as a lump sum at the time of retirement; however no
lump sum will be payable prior to January 1, 2004 in order to further encourage
retention. If an executive leaves Delta prior to January 1, 2004, no additional
contributions will be made to his or her trust following his or her departure.
If an executive leaves (whether before or after January 1, 2004) prior to his or
her normal retirement date and, without the consent of the Personnel &
Compensation Committee, goes to work for certain competitors, he or she must
repay Delta liquidated damages approximately equal to the contributions made to
the executive's trust, including taxes withheld.
In 2002, the following amounts were deposited into individual trusts for, and
taxes were withheld on behalf of, the following persons: Mr.
Mullin -- $4,542,295 and $3,699,938, respectively; Mr. Reid -- $844,587 and
$687,961, respectively; Ms. Burns -- $435,660 and $354,869, respectively; Ms.
Escarra -- $884,262 and $720,240, respectively; and Mr. Colman -- $1,135,132 and
$924,624, respectively. The total amounts deposited into individual trusts for,
and taxes withheld on behalf of, all 33 covered executives were $14,021,447 and
$11,543,509, respectively.
DELTA FAMILY-CARE DISABILITY AND SURVIVORSHIP PLAN
The Delta Family-Care Disability and Survivorship Plan ("D&S Plan") for eligible
non-pilot personnel provides monthly survivorship benefits based on a
participant's final average earnings and years of service, and monthly long-term
disability benefits based on a participant's final average earnings. The D&S
Plan also provides a lump sum death benefit of up to $50,000. In
26
general, for purposes of the D&S Plan, final average earnings are (1) for
purposes of determining benefits during the first six months of disability, the
employee's monthly earnings, based on the employee's salary at the time of
disability; and (2) for other purposes, the average of the employee's monthly
earnings, based on the employee's salary and eligible incentive compensation
awards over specified periods. In the event the employee dies while employed by
Delta, the employee's eligible family members are entitled to receive an amount
equal to 50%, 60% or 70% of final average earnings (depending on whether the
employee has one, two, or three or more eligible family members, respectively),
subject to reduction for service of less than 30 years with Delta and certain
benefits payable under Social Security, the Pension Plan and other sources. Any
benefits which may not be paid under the D&S Plan due to Internal Revenue Code
limits are provided under a supplemental plan for employees designated by the
Personnel & Compensation Committee, including the persons named in the Summary
Compensation Table.
OTHER MATTERS
In November, 2002, Delta announced changes to the Pension Plan. Generally, under
these changes:
- Employees hired after June 30, 2003 who are covered by the Pension Plan will
earn retirement benefits under a cash balance formula. These employees will
not be eligible to receive retirement benefits under the Pension Plan's final
average earnings formula.
- Employees covered by the Pension Plan on June 30, 2003 will earn new
retirement benefits for a period of seven years after that date equal to the
greater of the benefit determined under the Pension Plan's (1) final average
earnings formula; or (2) cash balance formula. These employees will not earn a
double benefit during this transition period, only the greater of the two
benefits.
- For years of service after June 30, 2010, employees covered by the Pension
Plan will earn new retirement benefits under the cash balance formula only,
regardless of their date of hire. Benefits earned under the Pension Plan's
final average earnings formula prior to June 30, 2010 will be preserved for
employees hired before June 30, 2003 regardless of their retirement date.
Delta also announced changes to the monthly survivorship benefits under the D&S
Plan for covered employees who die on or after July 1, 2003, or who retire after
July 1, 2003. Eligible survivors of employees who die on or after July 1, 2003
but before June 30, 2010, and survivors of retirees who retire after July 1,
2003 but on or before July 1, 2010, are eligible to receive up to 10 years of
monthly survivorship benefits from the date of the employee's or retiree's
death. No monthly survivor benefits from the D&S Plan will be paid on behalf of
participants who die while employed on or after July 1, 2010, or who retire
after July 1, 2010.
CHANGE IN CONTROL AGREEMENTS
In 1997 the Board of Directors authorized Delta to enter into Retention
Protection Agreements ("Retention Agreements") with management personnel at
certain levels, including the persons named in the Summary Compensation Table
other than Mr. Mullin. These agreements provide certain benefits that vary by
participation level to covered individuals if there is a Qualifying Event (as
defined) during the term of the Retention Agreement. A Qualifying Event occurs
if, within a specified period after a Change in Control of Delta (as defined)
(1) there is an involuntary termination of the individual's employment by Delta,
other than for Cause (as defined) or due to the individual's death or
disability; or (2) the individual voluntarily terminates his employment for Good
Reason (as defined). A Qualifying Event also occurs if there is a
27
Change in Control within one year after a termination under either circumstance
described in the preceding sentence as a result of actions taken by Delta in
anticipation of a Change in Control.
The benefits provided upon a Qualifying Event for executive officers include a
lump sum payment of three times the sum of the individual's annual base salary
rate and target incentive compensation award; the present value of the
individual's non-qualified pension benefits (with certain additional age and
service credits); certain retiree medical and monthly survivor coverage (or the
present value equivalent, depending on the individual's age) and life insurance
coverage; and certain flight benefits. In addition, upon a Change in Control,
pro rata target incentive compensation awards will be paid, and all outstanding
stock options, restricted stock and similar awards will immediately vest and
become nonforfeitable and exercisable. Moreover, if there is a Change in
Control, each outstanding performance-based long-term incentive award
opportunity will be paid in an amount equal to the greater of (1) the actual
award payable to the participant for the applicable performance period,
calculated as if the performance period had ended on the date of the Change in
Control, and (2) the target award payable to the participant for that
performance period, in each case prorated to reflect the portion of the
performance period elapsed through the date of the Change in Control. The
Retention Agreements also provide for reimbursement to the individual for taxes
on certain welfare benefits as well as any excise taxes paid under Section 4999
of the Internal Revenue Code and related taxes thereon.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
MR. MULLIN
Following the expiration of the initial five year term of Mr. Mullin's 1997
employment agreement with Delta, Delta and Mr. Mullin entered into a renewal of
the employment agreement effective November 29, 2002 ("Employment Agreement").
The renewed agreement provides for Mr. Mullin's continued employment as Delta's
Chief Executive Officer through December 31, 2007.
The Employment Agreement continues in effect Mr. Mullin's existing compensation
structure, consisting of annual salary of $795,000 (subject to possible future
increases), an annual incentive award opportunity, long-term incentive award
opportunities and participation in Delta's employee benefit programs, including
insurance, retirement and fringe benefits on terms no less favorable than the
terms offered to other senior Delta executives. Special provisions apply upon
Mr. Mullin's retirement prior to age 62 or death prior to commencement of
benefits.
In consideration of Mr. Mullin's entering into the Employment Agreement, on
November 29, 2002 Delta granted to Mr. Mullin restricted stock units and
non-qualified stock options covering 150,000 shares and 450,000 shares of Common
Stock, respectively. Delta will make an additional award of 150,000 shares of
restricted stock units in January 2004. The restricted stock units will vest,
and the stock options will become exercisable, only if Mr. Mullin remains at
Delta until December 31, 2007 or an earlier Change in Control occurs. The stock
options, once exercisable, will remain exercisable through November 28, 2012.
Pursuant to the terms of the Employment Agreement, during the period of Mr.
Mullin's employment with Delta and for two years thereafter, unless he receives
prior written consent from Delta, Mr. Mullin is prohibited from providing
management or executive services to Delta's competitors in the air
transportation business and from soliciting non-clerical employees away from
Delta.
28
In the event of the termination of Mr. Mullin's employment during the five year
term of the Employment Agreement by Delta without Cause (as defined), or by Mr.
Mullin for Good Reason (as defined), the Employment Agreement generally provides
that Mr. Mullin will be entitled to a lump sum payment equal to three times the
sum of his final annual salary and the greater of his target or actual annual
incentive award (prorated if there are less than three years remaining in Mr.
Mullin's employment term as of the date of Mr. Mullin's termination of
employment, but at least equal to the sum of his final annual salary and the
greater of his target or actual annual incentive award); a prorated target
incentive award for the year of termination; and continuation of medical and
other benefits for not less than one year after his termination of employment
and not more than the lesser of three years after his termination of employment
and the period from the date of his termination of employment and ending on
December 31, 2007. In addition, upon termination under these circumstances, Mr.
Mullin will be credited with not less than one year of additional service and
not more than the lesser of three additional years of service and the balance of
his employment term for purposes of calculating his retirement benefit under
Delta's defined benefit retirement plans and his excess benefit agreement. For
these purposes, Cause and Good Reason are generally defined in a manner similar
to the definitions of these terms in the Retention Agreements described above.
In addition, the definition of Good Reason applicable to Mr. Mullin also
includes Mr. Mullin's ceasing to be Chairman of the Board for reasons other than
Delta's compliance with any legal, regulatory or corporate governance
requirement.
In the event of a Change in Control (as defined) of Delta, the Employment
Agreement generally provides that Mr. Mullin will be entitled to a lump sum
payment equal to three times the sum of his final annual salary and the greater
of his target or actual annual incentive award; a prorated target incentive
award for the year of termination; and continuation of medical and other
benefits for three years after termination of his employment. In addition, upon
a Change in Control, pro rata target incentive compensation awards will be paid
and all outstanding stock options, restricted stock and similar awards granted
under Delta's 2000 Performance Compensation Plan will immediately vest and
become exercisable. Also in the event of a Change in Control, Mr. Mullin will be
entitled to all of the benefits afforded to senior executives under the
Retention Agreements.
OTHER EMPLOYMENT AGREEMENTS
Messrs. Reid and Colman have employment agreements with Delta which provide for
them to participate in Delta's employee benefits programs, including insurance,
retirement and fringe benefits, as are provided to Delta's Executive Vice
Presidents. Mr. Reid's employment agreement also states that Delta will pay,
through April 30, 2002, premiums on an existing life insurance policy for Mr.
Reid and the taxes related to these premium payments.
Mr. Colman's employment agreement also provides that, if Mr. Colman's employment
is terminated prior to June 1, 2005 by Delta without Cause or by Mr. Colman for
Good Reason, or for any reason after May 31, 2005, Mr. Colman will be treated as
a retiree for purposes of Delta's Family-Care benefit plans. In certain
circumstances, Mr. Colman may also receive an additional lump sum payment. That
payment ranges from $162,000, if termination occurs between October 1, 2002 and
September 30, 2003, to $81,000 if termination occurs between October 1, 2009 and
June 1, 2010. Thereafter, no lump sum payment would be required. For purposes of
Mr. Colman's employment agreement, the definitions of Cause and Good Reason are
the same as the definitions of these terms in the Retention Agreements described
above.
29
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the shares of Common Stock that
may be issued upon the exercise of options and other awards under Delta's
existing equity compensation plans as of December 31, 2002.
(C)
(A) (B) NO. OF SECURITIES REMAINING
NO. OF SECURITIES WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
TO BE ISSUED UPON EXERCISE PRICE OF UNDER EQUITY COMPENSATION PLANS
EXERCISE OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
Equity compensation
plans approved by
securities holders(1) 58,688,379 $44.23 7,673,455(3)
Equity compensation
plans not approved by
securities holders(2) 117,245 $31.08 132,755
Total 58,805,624 $44.20 7,806,210(3)
(1) Includes the DeltaShare Stock Option Plan and the Pilots Stock Option Plan,
which are broad-based plans for Delta's non-pilot employees and pilots; the
Delta 2000 Performance Compensation Plan, including a predecessor plan, an
equity compensation plan for management; and the Non-Employee Directors'
Stock Plan.
(2) In 1998, the Board of Directors adopted the Non-Employee Directors' Stock
Option Plan. The plan provides for the grant of non-qualified stock options
on terms set by the Board. A total of 250,000 shares of Common Stock may be
issued under this plan.
(3) Includes 3,161,697 shares of Common Stock available for awards other than
stock options pursuant to the Delta 2000 Performance Compensation Plan,
including a predecessor plan, and 457,272 shares of Common Stock available
for awards other than stock options under the Non-Employee Directors' Stock
Plan.
30
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total returns(1) during the
specified period on Delta's Common Stock, the Standard & Poor's 500 Stock Index
and a peer group consisting of the major U.S. airlines.
(PERFORMANCE GRAPH)
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
----------- ----------- ----------- ----------- ----------- -----------
DELTA $100.00 $ 87.55 $ 84.02 $ 84.83 $ 49.60 $20.65
S&P 500 $100.00 $128.58 $155.63 $141.46 $124.66 $97.12
MAJOR U.S. AIRLINES (2) $100.00 $ 83.44 $ 87.08 $103.29 $ 64.27 $30.54
------------------------------
(1) Cumulative total return is defined as stock price appreciation plus
dividends paid, assuming reinvestment of all such dividends.
(2) The peer group of the major U.S. airlines is defined as all U.S. airlines
with operating revenues exceeding $1 billion during 2002. It consists of
Alaska Air Group, America West Holdings Corporation, AMR Corporation,
Continental Airlines, Delta, Northwest Airlines, Southwest Airlines, UAL
Corporation and US Airways Group.
31
AUDIT COMMITTEE REPORT
The Audit Committee of Delta's Board of Directors consists entirely of
non-employee directors who are independent, as defined in the New York Stock
Exchange Listing Standards. The Board of Directors has adopted a Charter for the
Audit Committee.
The Audit Committee assists the Board of Directors in its oversight of Delta's
financial statements. Management is responsible for the financial statements and
the financial reporting process. The independent auditors, Deloitte & Touche
LLP, are responsible for expressing an opinion on the conformity of Delta's
audited financial statements to accounting principles generally accepted in the
United States. Also, since 1999, Delta has retained PricewaterhouseCoopers LLP
to provide certain internal audit consulting services. A PricewaterhouseCoopers
partner, who reports to Delta's Chief Risk Officer, heads Delta's internal audit
function, attends Audit Committee meetings and provides regular reports to the
Committee at those meetings.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements with management and the independent auditors. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees), as modified or supplemented. In addition, the Audit Committee has
received from the independent auditors the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as modified or supplemented, and discussed
with the independent auditors their independence from Delta and its management.
The Audit Committee has also considered whether the independent auditors'
provision of non-audit services to Delta is compatible with the auditors'
independence.
In reliance on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in Delta's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, for filing with the Securities and Exchange Commission.
The Audit Committee Charter provides that one duty of the Audit Committee is to
provide advice to the Board of Directors in selecting, evaluating and replacing
the independent auditors. In performing that duty, the Audit Committee
recommended that the Board of Directors appoint Deloitte & Touche LLP to serve
as Delta's independent auditors for 2003. The Board of Directors agreed with
this recommendation and, accordingly, appointed Deloitte & Touche LLP as Delta's
independent auditors for 2003, subject to shareowner ratification.
Respectfully submitted,
THE AUDIT COMMITTEE
George M.C. Fisher, Chairman
Joan E. Spero
Andrew J. Young
32
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as Delta's independent auditors for 2003,
subject to ratification by the shareowners. Representatives of Deloitte & Touche
LLP are expected to be present at the annual meeting, will have an opportunity
to make a statement if they desire, and will be available to respond to
questions. If the shareowners do not ratify the selection of Deloitte & Touche
LLP, the Board of Directors will reconsider the selection of independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
FEES OF INDEPENDENT AUDITORS FOR YEAR ENDED DECEMBER 31, 2002
The following table shows the aggregate fees billed to Delta by its independent
auditors, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu,
and their respective affiliates, for services rendered during the year ended
December 31, 2002. Deloitte & Touche LLP has announced its intention to separate
from Deloitte Consulting.
DESCRIPTION OF FEES AMOUNT($)
Audit Fees(1) 522,000
Financial Information Systems Design and Implementation Fees 0
All Other Fees(2) 1,636,903
(1) Includes fees for audits of Delta's financial statements for the year ended
December 31, 2002, and reviews of financial statements for interim periods.
(2) Includes fees for comfort letters, separate audits of subsidiaries, separate
audits for regulatory purposes, audits of employee benefit plans, accounting
consultations, tax services and work performed to review expense allocations
for various employee benefit plans.
INFORMATION REGARDING CHANGE OF INDEPENDENT AUDITORS
The Audit Committee annually considers and recommends to the Board of Directors
the selection of Delta's independent auditors. As recommended by the Audit
Committee, the Board of Directors on March 6, 2002 decided to no longer engage
Arthur Andersen LLP ("Andersen") as Delta's independent auditors and engaged
Deloitte & Touche LLP to serve as Delta's independent auditors for 2002. The
appointment of Deloitte & Touche LLP as independent auditors for 2002 was
ratified by Delta's shareowners at the 2002 annual meeting.
Andersen's reports on Delta's consolidated financial statements for the 2001 and
2000 fiscal years did not contain an adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope or accounting
principles.
During Delta's 2001 and 2000 fiscal years and through March 27, 2002 (the date
of Delta's Annual Report on Form 10-K for the year ended December 31, 2001),
there were no disagreements with Andersen on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to Andersen's satisfaction, would have caused them to
make reference to the subject matter in connection with their report on Delta's
consolidated financial statements for such years; and there were no reportable
events, as listed in Item 304(a)(1)(v) of SEC Regulation S-K.
33
During Delta's 2001 and 2000 fiscal years and until March 6, 2002, Delta did not
consult Deloitte & Touche LLP with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Delta's consolidated financial
statements, or any other matters or reportable events listed in Items
304(a)(2)(i) and (ii) of SEC Regulation S-K.
PROPOSAL 3 -- APPROVAL OF AMENDMENTS TO
THE DELTA 2000 PERFORMANCE COMPENSATION PLAN, THE DELTASHARE
STOCK OPTION PLAN AND THE PILOTS STOCK OPTION PLAN
INTRODUCTION
Stock options provide retention and performance incentives to employees and
align their interests with those of shareowners. Due to the substantial decline
in the market price of the Common Stock, particularly after the events of
September 11, 2001, the exercise prices of most of Delta's outstanding stock
options are considerably higher than the current market price of the Common
Stock. The Board of Directors believes that these "underwater" options are not
accomplishing their intended purpose. Accordingly, the Board of Directors has
determined that it is in the best interest of Delta and its shareowners to amend
Delta's equity compensation plans to authorize a stock option exchange program
for its management personnel, its non-management employees who are not pilots
and its pilots.
The Board of Directors has adopted, subject to shareowner approval, amendments
to Delta's three equity compensation plans to authorize a stock option exchange
program. Under the exchange program, eligible employees would be offered a
one-time opportunity to exchange their current stock options having an exercise
price of $25 or more for a fewer number of replacement stock options with a new
exercise price. The replacement options would be granted at least six months and
one day following the cancellation of the current options and would have an
exercise price equal to the fair market value of the Common Stock on their grant
date.
The amendments would permit Delta to offer the stock option exchange program to
eligible employees under the following plans:
- Delta 2000 Performance Compensation Plan ("2000 Plan");
- DeltaShare Stock Option Plan ("Nonpilots Plan"); and
- Pilots Stock Option Plan ("Pilots Plan").
Under the 2000 Plan, management personnel may be granted stock options and other
awards. The Nonpilots and Pilots Plans (collectively known as SkyShares) are
broad-based stock option plans for non-management employees and pilots,
respectively, pursuant to which stock options were granted in 1996, 1997 and
1998. All three plans were adopted by the Board of Directors with shareowner
approval.
Shareowner approval is required for the amendments to the 2000 Plan under the
terms of that plan and the listing standards of the New York Stock Exchange, but
shareowner approval is not required for the amendments to either the Nonpilots
or Pilots Plans. The Board of Directors is seeking shareowner approval for the
amendments to the Nonpilots and Pilots Plans because the Board believes this is
an appropriate corporate governance practice. Because the amendments to all
three plans are related elements of Delta's program to strengthen the retention
and
34
performance incentives of its stock option programs, the amendments to the plans
are being presented to shareowners as one proposal.
If shareowners approve the amendments to the plans, the Board of Directors
intends to commence the stock option exchange program under all three plans
concurrently after the annual meeting. The amendments to the Pilots Plan are
also subject to the approval of the Air Line Pilots Association, International
("ALPA"), the collective bargaining representative for Delta's pilots. If ALPA
does not approve the amendments to the Pilots Plan by May 1, 2003, the Board
intends to conduct the exchange program under the 2000 Plan and the Nonpilots
Plan. If shareowners do not approve the amendments to the plans, the plans will
not be amended to permit a stock option exchange program.
PARTICIPATION
The Board of Directors has determined that its members should have no financial
interest in the exchange program. Accordingly, no member of the Board would
participate in the program, including Mr. Mullin, Delta's Chairman of the Board
and Chief Executive Officer.
Delta's executive officers other than Mr. Mullin ("Executive Officers") would be
eligible to participate in the exchange program, though their participation
would be on terms designed to provide them with a less favorable exchange ratio
and greater retention and performance incentives than other participants. As
discussed below, the provisions applicable to Executive Officers (1) provide a
lesser number of replacement stock options in exchange for their current
options; (2) provide that their replacement options become exercisable over a
longer period of time than the replacement options granted to other
participants; and (3) restrict their sale of Common Stock acquired upon exercise
of replacement options. For purposes of the amendments, the Executive Officers
are Mr. Reid, Ms. Burns, Ms. Escarra and Mr. Colman.
The Personnel & Compensation Committee of the Board of Directors has discretion
under the amendments to the 2000 Plan and the Nonpilots Plan to determine the
eligible participants in the exchange program. Participation in the exchange
program would generally be limited to active employees and those on military and
certain short-term leaves.
BACKGROUND
As of February 28, 2003, stock options for approximately 21.1 million, 21.3
million and 16.1 million shares of Common Stock were outstanding under the 2000
Plan, the Nonpilots Plan and the Pilots Plan, respectively. Some of these
options have exercise prices of less than $25 or are held by persons who would
not be eligible to participate in the exchange program. As of February 28, 2003,
the weighted average exercise price of the approximately 58.5 million
outstanding stock options under the plans was $44.21. On February 28, 2003, the
closing price of the Common Stock on the New York Stock Exchange was $8.40 per
share.
In addition to its retention, performance and alignment value, the exchange
program also would reduce the number of outstanding stock options. Under the
amendments to the Nonpilots and Pilots Plans, the excess number of the stock
options surrendered in an exchange over the fewer number of replacement stock
options granted under these plans would not be available for future grant.
Therefore, to the extent that current stock options under these plans are
exchanged, potential dilution to shareowners from the exercise of stock options
would be reduced. With respect to the 2000 Plan, this excess number of stock
options would be available for future grant. Because participation in the stock
option exchange program would be voluntary, it is not
35
possible to determine at this time how many stock options would be surrendered
for cancellation and how many replacement options would be granted.
DESCRIPTION OF THE AMENDMENTS AND THE EXCHANGE PROGRAM
The amendments authorize Delta to establish a stock option exchange program
under the 2000 Plan, the Nonpilots Plan and the Pilots Plan. A summary of the
amendments and the stock option exchange program follows.
GRANT OF NEW OPTIONS. Under the stock option exchange program, eligible
employees would have a one-time opportunity to exchange their current stock
options having an exercise price of $25 or more for a fewer number of
replacement stock options. The replacement options would be granted under the
same plan under which the exchanged options were originally granted. Surrendered
stock options granted under a predecessor plan to the 2000 Plan would be
replaced with stock options granted under the 2000 Plan. Participation in the
program is voluntary. All current stock options are, and all replacement stock
options would be, non-qualified stock options for purposes of the Internal
Revenue Code, as amended.
EXERCISE PRICE. The exercise price of replacement options would be the fair
market value of a share of Common Stock on the grant date of the replacement
options. For accounting reasons, the grants of replacement options would occur
no earlier than six months and a day following the cancellation of the current
options.
EXCHANGE RATIO. Delta's objective is to set the aggregate value of the
replacement stock options approximately equivalent to the aggregate value of the
outstanding stock options eligible for exchange. The number of outstanding stock
options that an eligible employee would surrender for cancellation in exchange
for the grant of one replacement option is known as the exchange ratio. Delta
worked with Mercer Human Resources Consulting, a nationally recognized
compensation consulting firm, to estimate the option values and set the exchange
ratios for the issuance of replacement options. Mercer estimated the option
values using the Black-Scholes stock option valuation model and based the
exchange ratios on these option values. The Black-Scholes model is a common
method used for estimating the value of a stock option. For purposes of
determining the value of an option under the Black-Scholes model, the following
factors, among others, were used: (1) the option's exercise price; (2) an
assumed grant price based on the prior 200 day trading average for the Common
Stock; (3) the monthly volatility of the Common Stock price during the prior
three years; and (4) the length of the remaining term of the stock option.
This valuation of the aggregate replacement options and current options was made
and the exchange ratios were set as of February 28, 2003. Subsequent changes in
the Common Stock price may affect this valuation, but the exchange ratios will
not be altered.
Participants in the exchange program would receive one replacement stock option
for the surrender of more than one current stock option, with the actual
exchange ratio depending on the grant date of the current options being
surrendered for cancellation. Delta's purpose in designing the program this way
is to provide retention and performance incentives for eligible employees while
avoiding the dilution to shareowners that would result if employees exchanged
all outstanding stock options for replacement options on a one-for-one basis.
The following table shows the specific number of current stock options, by grant
date, that a participant would have to surrender to receive one replacement
option. The number of
36
replacement stock options granted to each Executive Officer would be reduced by
10%, as described below under "Provisions Applicable to Executive Officers."
TIER GRANT DATE EXCHANGE RATIO
1 1995-1999 1-for-3
2 2000-2001 1-for-2
3 2002 1-for-1.5
The application of these exchange ratios means, for instance, that an eligible
employee would receive one replacement stock option upon surrender of two stock
options granted in 2000. Fractional options would be rounded up to the nearest
whole option.
Under the amendments, a participant in the exchange program would select by tier
the stock options to surrender. The participant would be required to surrender
all eligible options in that tier. For instance, the participant might surrender
all eligible options in Tiers 2 and 3 only while retaining his or her options in
Tier 1. All outstanding options under the Nonpilots and Pilots Plans are in Tier
1.
TERM. Each replacement stock option would have a term equal to the remaining
term of the option surrendered for cancellation. For instance, stock options
that had a remaining term of two years when canceled in an exchange would be
replaced with options having a term of two years on their grant date. The
current options generally had a term of ten years at their grant date.
EXERCISABILITY. The dates that replacement stock options become exercisable
would vary by the plan under which the replacement stock options are granted.
- Replacement stock options granted under the Nonpilots and Pilots Plans
would become exercisable in whole on the first anniversary of their grant
date. This is consistent with the terms of the stock options originally
granted under these plans.
- Replacement stock options granted under the 2000 Plan in exchange for
options granted in 1996 through 2002 would become exercisable in 50%
increments on each of the first two anniversaries of their grant date.
This is consistent with the current practice of the Personnel &
Compensation Committee when it grants stock options under the 2000 Plan.
Due to the limited option term remaining at the time of grant,
replacement stock options granted in exchange for options awarded in 1995
would become exercisable in full on the first anniversary of their grant
date.
- Replacement stock options granted to Executive Officers would become
exercisable in 25% increments on each of the first four anniversaries of
their grant date. This schedule of exercisability is twice as long as for
other holders of options under the 2000 Plan. It is four times as long as
the schedule of exercisability for holders of options under the Nonpilots
and Pilots Plans.
Current options under the 2000 Plan become exercisable and nonforfeitable on a
Change in Control of Delta (as defined in the 2000 Plan), and replacement
options granted under the 2000 Plan would also become exercisable and
nonforfeitable upon a Change in Control. Current options under the Nonpilots and
Pilots Plans do not become exercisable or nonforfeitable upon a Change in
Control, but the replacement options under these plans would become exercisable
and nonforfeitable upon a Change in Control.
37
PROVISIONS APPLICABLE TO EXECUTIVE OFFICERS. Executive Officers who participate
in the exchange program would also be subject to the following provisions:
- An Executive Officer would receive only 90% of the replacement stock
options to which he or she would be entitled by application of the
exchange ratio to the options to be canceled. This means that an
Executive Officer would get 10% fewer replacement options than would be
obtained under the exchange ratios.
- Upon exercise of replacement stock options, Executive Officers would be
required to hold the underlying Common Stock for one year, except that
this restriction does not apply to shares used to pay the exercise price,
minimum required tax withholding, or related brokerage commission. This
holding period would lapse on a Change in Control, death, termination of
employment for disability or retirement at or after age 62.
These provisions are in addition to the requirement that replacement options
granted to Executive Officers become exercisable over a longer period of time
than the replacement options granted to other participants in the exchange
program (see "Exercisability" above).
OTHER TERMS AND CONDITIONS. To the extent consistent with the terms of the
amendments, the Personnel & Compensation Committee would have the authority to
adopt such additional terms and conditions for the stock option exchange program
and replacement options as it determines to be necessary and appropriate,
including accelerating the exercisability of the replacement options in the case
of death and certain terminations of employment.
AVAILABLE SHARES. There are no shares of Common Stock available for new stock
option grants under the Nonpilots and Pilots Plans. The amendments to these
plans provide that shares subject to outstanding options under these plans that
are canceled in the exchange program would be available for issuance only to the
extent necessary to grant replacement stock options. The amendments to the 2000
Plan clarify that shares subject to outstanding options under the 2000 Plan (or
its predecessor) that are canceled in the exchange program would be available
for future grant, both for replacement stock options and future issuances under
that plan.
ACCOUNTING CONSEQUENCES FOR DELTA; INCOME TAX CONSEQUENCES FOR EMPLOYEES. Delta
believes that the stock option exchange program authorized by the amendments
should not result in compensation charges against Delta's earnings under current
accounting guidance. Delta intends that the option exchange be treated as a
non-taxable exchange for U.S. federal income tax purposes. Therefore, Delta
believes that participating employees should not realize any income for U.S.
federal income tax purposes upon the grant of the replacement options.
OPTIONS HELD BY EXECUTIVE OFFICERS
The Executive Officers hold the following numbers of stock options granted under
the 2000 Plan with exercise prices of $25 or more per share: Mr.
Reid -- 693,600; Ms. Burns -- 307,000; Ms. Escarra -- 477,900; and Mr.
Colman -- 463,300. If a stock option exchange program were commenced and the
Executive Officers chose to surrender for cancellation all eligible options, the
following numbers of replacement options would be granted to them: Mr.
Reid -- 269,194; Ms. Burns -- 140,612; Ms. Escarra -- 185,958; and Mr.
Colman -- 167,537.
SUMMARIES OF THE PLANS
Appendix A to this proxy statement describes the 2000 Plan and Appendix B
describes the Nonpilots and Pilots Plans. Delta's website, at
www.delta.com/inside/investors/corp_info/corp_governance/index.jsp, contains
complete copies of the plans and the amendments being
38
submitted to shareowners for approval. The plans and amendments are also
available upon request from Delta's Secretary at the address on page 50 of this
proxy statement.
IMPORTANT NOTE:
If shareowners approve the amendments and a stock option exchange program
commences, Delta will provide additional materials to eligible employees
regarding the exchange program, including information regarding its risks,
mechanics and timing. The exchange program would not commence before mid-May
2003. Eligible employees should read the additional materials received at that
time because they will contain important information about the exchange program.
In accordance with applicable law, these materials would be filed with the
Securities and Exchange Commission and available for free from its website,
www.sec.gov. The materials would also be available from Delta's website.
Eligible employees would have at least 20 business days to decide whether to
participate in the exchange program.
BOARD RECOMMENDATION
The Board of Directors believes that the amendments to the 2000 Plan, the
Nonpilots Plan and the Pilots Plan to authorize a stock option exchange program
are in the best interest of Delta and its shareowners because the exchange
program would provide retention and performance incentives to employees and
align their interests with those of shareowners. ACCORDINGLY, THE BOARD
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS.
PROPOSALS 4, 5, 6, 7, 8 AND 9 -- SHAREOWNER PROPOSALS
The following six proposals have been submitted by individual shareowners. Each
proposal will be voted on at the annual meeting if the proponent is present at
the meeting and submits the proposal for a vote.
In accordance with federal securities law regulations, we include the shareowner
proposals and the related supporting statements as submitted by the proponents.
To easily distinguish between material provided by the proponents, and
information the Board of Directors would like you to consider, we have put a box
around material provided by each proponent.
39
PROPOSAL 4
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who is the beneficial owner of 200 shares of
Common Stock, has given notice that she intends to introduce the following
resolution at the annual meeting:
"RESOLVED: That the stockholders of Delta Air Lines, assembled in Annual Meeting
in person and by proxy, hereby request the Board of Directors to take the
necessary steps to provide for cumulative voting in the election of directors,
which means each stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single candidate, or any
two or more of them as he or she may see fit.
REASONS: Many states have mandatory cumulative voting, so do National Banks. In
addition, many corporations have adopted cumulative voting. Last year the owners
of 20,676,677 shares, representing approximately 27% of shares voting, voted FOR
this proposal.
If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Shareowners rejected a similar proposal at each of the last five annual
meetings. The Board of Directors believes shareowners should again defeat this
proposal because cumulative voting:
- may enable special interest groups to elect a director;
- may result in the election of directors who feel an obligation to
represent the special interest groups that elected them rather than all
of Delta shareowners generally; and
- may create factionalism among Board members and undermine their ability
to work together effectively.
To minimize these risks, Delta, like most other major corporations, does not use
cumulative voting. The Board of Directors believes that Delta's existing system
for electing directors:
- ensures that each director is elected by shareowners representing a
plurality of the votes cast at the meeting;
- encourages accountability of each director to all shareowners; and
- reduces the risk of divisive factionalism.
In sum, the Board of Directors believes that Delta's existing system of electing
directors best serves the interests of all shareowners. ACCORDINGLY, THE BOARD
RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
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PROPOSAL 5
Captain Michael Messmore, 101 Sky River Road, P.O. Box 609, Toledo, Washington,
98591-0609, who is the beneficial owner of 2,184 shares of Common Stock and 194
shares of ESOP Preferred Stock, has given notice that he intends to introduce
the following resolution at the annual meeting:
"RESOLVED, that the shareholders of Delta Air Lines, Inc. ("Delta") urge the
Board of Directors to seek shareholder approval for future severance
arrangements with senior executives (specifically, the Chief Executive Officer,
President, Chief Operating Officer, and all Executive Vice Presidents) that
provide benefits in an amount exceeding 2.99 times the sum of the executive's
salary plus bonus. "Future severance agreements" include agreements renewing,
modifying or extending existing severance agreements or employment agreements
containing severance provisions. "Benefits" include lump-sum cash payments
(including payments in lieu of medical and other benefits) and the estimated
present value of periodic retirement payments, fringe benefits and consulting
fees and the early vesting of stock options and restricted stock."
PROPONENT'S SUPPORTING STATEMENT
"Upon the resignation of former CEO Ronald Allen in 1997, Delta agreed to pay a
lump sum severance amount of $4,501,000, $85,515 in lieu of medical and dental
benefits, annual retirement payment of $765,000, annual fee of $25,000 for
service as an "Advisory Director," consulting fees of $500,000 per year for
seven years (despite the fact that Mr. Allen "shall not be called upon to devote
a major portion of his business time to the performance of services as
consultant to the corporation" and "shall only be required to perform his
consulting services at such times, and in such places and for such periods as
will result in the least inconvenience" to him), and, for 10 years after his
resignation, office space, full-time secretarial support, country club
membership and dues for the Commerce Club of Atlanta. Delta has paid $408,776 to
design, build and furnish office space for Mr. Allen. Such a generous severance
package was, in my opinion, unwarranted in light of Mr. Allen's performance as
CEO.
Agreements with current CEO Leo Mullin and certain other executives provide
severance benefits, including if employment is terminated in connection with a
change in control. We recognize that severance agreements such as those Delta
has entered into with Messrs. Allen, Mullin and others may be appropriate in
some circumstances. However, given the magnitude of the benefits payable and the
effect of those obligations in the event of a change in control, we believe that
Delta should seek shareholder approval of any future agreements that provide for
benefits exceeding 2.99 times the executive's base salary plus bonus. We believe
that requiring shareholder approval of such agreements may have the beneficial
effect of insulating the Board from manipulation in the event Delta must
terminate a senior executive's employment.
Because it is not always practical to obtain prior shareholder approval, Delta
would have the option, if it implemented this proposal, of seeking approval
after the material terms of the agreement were agreed upon. Institutional
investors such as the California Public Employees Retirement System have
recommended shareholder approval of these types of agreements in their proxy
voting guidelines. The Council of Institutional Investors favors shareholder
approval if the amount payable exceeds 200% of the executive's annual base
salary.
For these reasons I urge shareholders to vote FOR this proposal."
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Shareowners rejected a similar proposal at each of the last four annual
meetings. The Board of Directors believes shareowners should again defeat this
proposal because its adoption would restrict Delta's ability to retain and
recruit highly qualified executives at a time when the airline industry is
facing unprecedented financial and operational challenges.
To maintain a top management team, Delta must provide employment benefits that
are based on the competitive market and each executive's particular
circumstances. Because severance benefits are commonly provided by other
companies, Delta must have the ability to offer competitive severance benefits
to retain its own executives and to motivate other highly qualified executives
to join Delta.
Adoption of this proposal would place Delta at a competitive disadvantage by:
- arbitrarily limiting what Delta may offer as a severance benefit; or
- requiring Delta either to incur significant time and expense to convene a
special meeting of shareowners to approve an executive's severance
benefits, or to delay finalizing those benefits until the next annual
meeting of shareowners.
In either case, Delta could lose executives to another company which can act
promptly because it is not subject to a shareowner approval requirement.
Delta's existing practices require approval by the Board of Directors or its
Personnel & Compensation Committee before Delta may enter into a severance
agreement with any executive officer. The Board of Directors believes this
policy ensures that severance arrangements are reasonable and in the best
interests of Delta. All the members of the Board of Directors other than Mr.
Mullin, and all the members of the Personnel & Compensation Committee, are
independent of Delta.
In sum, this proposal would restrict Delta's ability to retain and recruit
talented executives by limiting its flexibility to provide severance benefits
that address the competitive market, Delta's needs and the individual nature of
these situations. ACCORDINGLY, THE BOARD RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PROPOSAL 6
The United Brotherhood of Carpenters Pension Fund, Carpenters Corporate
Governance Project, 101 Constitution Avenue, N.W., Washington, D.C. 20001, which
is the beneficial owner of approximately 600 shares of Common Stock, has given
notice that it intends to introduce the following resolution at the annual
meeting:
INDEXED OPTIONS PROPOSAL
"RESOLVED, that the shareholders of Delta Air Lines Inc. ("Company") request
that the Board of Directors adopt an executive compensation policy that all
future stock option grants to senior executives shall be performance-based. For
the purposes of this resolution, a stock option is performance-based if the
option exercise price is indexed or linked to an industry peer group stock
performance index so that the options have value only to the extent that the
Company's stock price performance exceeds the peer group performance level."
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PROPONENT'S STATEMENT OF SUPPORT
"As long-term shareholders of the Company, we support executive compensation
policies and practices that provide challenging performance objectives and serve
to motivate executives to achieve long-term corporate value maximization goals.
While salaries and bonuses compensate management for short-term results, the
grant of stock and stock options has become the primary vehicle for focusing
management on achieving long-term results. Unfortunately, stock option grants
can and do often provide levels of compensation well beyond those merited. It
has become abundantly clear that stock option grants without specific
performance-based targets often reward executives for stock price increases due
solely to a general stock market rise, rather than to extraordinary company
performance.
Indexed stock options are options whose exercise price moves with an appropriate
peer group index composed of a company's primary competitors. The resolution
requests that the Company's Board ensure that future senior executive stock
option plans link the options exercise price to an industry performance index
associated with a peer group of companies selected by the Board, such as those
companies used in the Company's proxy statement to compare 5 year stock price
performance.
Implementing an indexed stock option plan would mean that our Company's
participating executives would receive payouts only if the Company's stock price
performance was better than that of the peer group average. By tying the
exercise price to a market index, indexed options reward participating
executives for outperforming the competition. Indexed options would have value
when our Company's stock price rises in excess of its peer group average or
declines less than its peer group average stock price decline. By downwardly
adjusting the exercise price of the option during a downturn in the industry,
indexed options remove pressure to reprice stock options. In short, superior
performance would be rewarded.
At present, stock options granted by the Company are not indexed to peer group
performance standards. As long-term owners, we feel strongly that our Company
would benefit from the implementation of a stock option program that rewarded
superior long-term corporate performance. In response to strong negative public
and shareholder reactions to the excessive financial rewards provided executives
by non-performance based option plans, a growing number of shareholder
organizations, executive compensation experts, and companies are supporting the
implementation of performance-based stock option plans such as that advocated in
this resolution. We urge your support for this important governance reform."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Shareowners rejected a similar proposal at the 2000 and 1999 annual meetings.
The Board of Directors believes shareowners should again defeat this proposal
for the following reasons:
- Delta's practice of granting stock options with an exercise price equal
to the fair market value of the Common Stock on the date the stock option
is granted appropriately aligns the interests of executives and
shareowners because executives do not receive any benefits unless the
stock price increases. In contrast, the holder of an indexed stock option
could benefit even if the stock price falls below the fair market value
of the Common Stock on the date the stock option is granted.
- Delta's stock option program design matches typical competitive practice.
It is comparable to the stock option plans used by most public U.S.
companies, including
43
companies with which Delta competes for executive talent. Relatively few
companies use indexed stock options.
- Delta's executive compensation program focuses on Delta's performance
relative to airline industry peer groups. For example, the amounts earned
under Delta's annual incentive compensation program for 2002 were based
on performance goals established early in the year, including Delta's
EBITDAR margin ranking, safety performance and customer satisfaction
ratings compared to other airlines. Similarly, the awards earned under
Delta's long-term incentive program in 2002 were based on Delta's total
shareowner return and customer service performance relative to other
airlines during the period that began July 1, 1999 and ended June 30,
2002.
In sum, the Board of Directors believes that Delta's executive compensation
program is appropriately designed, and that compensation is strongly linked to
Delta's performance. ACCORDINGLY, THE BOARD RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PROPOSAL 7
Captain Scott H. Martin, 853 Symphony Isles Boulevard, Apollo Beach, Florida
33572, who is the beneficial owner of 142 shares of Common Stock and 64 shares
of ESOP Preferred Stock, has given notice that he intends to introduce the
following resolution at the annual meeting:
"RESOLVED, that the shareholders of Delta Air Lines, Inc. ("Delta") urge the
Board of Directors to adopt a policy that the cost of stock options be
recognized as an expense of Delta's income statement."
PROPONENT'S SUPPORTING STATEMENT
"In recent years, there has been an explosion in the use of stock options to
compensate executives and directors. Between 1993 and 2000, the percentage of
executive pay awarded in the form of stock options jumped from 30.4% to 68.8%,
according to Standard & Poor's. During that time, average CEO compensation
increased more than five-fold. Pearl Meyer & Partners reported in "2001 Equity
Stake" that stock option "mega grants" -- those with a value exceeding $10
million -- "continue to grow rapidly in size and, to a lesser degree,
prevalence."
Stock options comprise an important part of Delta's executive compensation. From
CEO Leo Mullin's hiring in August 1997 through the end of 2001, he was granted
options to buy 1,693,200 shares of Delta stock, with an aggregate estimated
value of $45,918,859. Delta has elected to disclose the effect of options on
earnings per shares in a footnote, rather than expensing them, as permitted by
current accounting standards.
I believe that expensing stock option awards more accurately reflects the costs
of such awards to a company. Stock options are a form of compensation; they have
value to the recipient and a cost to the company. Moreover, the failure to
expense stock options distorts reported earnings. According to the June 27, 2002
issue of the Analyst's Accounting Observer, the lack of expense recognition for
options resulted in a 31% overstatement of the 2001 earnings of S&P 500
companies. Standard & Poor's recently began calculating a "core earnings" figure
in which the cost of options is treated as an expense.
44
Expensing fixed stock option awards will also eliminate a disincentive to award
indexed and contingent-vesting options, which tie compensation more closely to
company rather than market or industry performance and which must be expensed.
The Conference Board's Commission on Public Trust and Private Enterprise
recently recommended that companies be required to expense fixed option awards
in order to level the playing field among forms of equity-based compensation.
I am concerned that not expensing stock options may lead to abuse by companies
that see them as "free money." As Standard & Poor's put it in its recent report,
"when something is significantly underpriced, it is often also substantially
overconsumed." I believe this concern is relevant to Delta, since Institutional
Shareholder Services, the largest proxy advisory service, has calculated that
the total potential voting power dilution of Delta's equity compensation plan
stands at 32.45%.
Voluntarily expensing stock options signals to the market that a company is
committed to transparency and corporate governance best practices. As of October
25, 2002, 86 companies had announced they would begin expensing stock options,
according to Standard & Poor's. Delta should join them.
I urge shareholders to vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Board of Directors believes financial statements should present a company's
earnings in an accurate and transparent manner, and allow investors to compare
the performance of companies in the same and different industries.
Generally accepted accounting principles ("GAAP") permit companies to account
for stock options using either of two methods. One approach -- the intrinsic
value method -- measures compensation expense as the amount by which the fair
market value of the stock on the date the stock option is granted exceeds the
option's exercise price. Like most public companies, Delta uses the intrinsic
value method. Delta's stock options have no "intrinsic value," as defined by
GAAP, because the exercise price of the stock option is equal to the fair market
value of the Common Stock on the date the stock option is granted. The other
approach -- the fair value method -- measures compensation expense based on the
fair value of the stock option on its grant date. GAAP requires companies that
use the intrinsic value method to disclose the impact of the fair value method
in the notes to the financial statements. Delta fully complies with these
requirements.
While the fair value method has merit, there is no uniform methodology required
for valuing stock options under the fair value method. Consequently, this
approach may result in financial statements that are not comparable among
different companies.
The Board of Directors believes that Delta should continue to use the intrinsic
value method to account for stock options at this time for the following
reasons:
- It is in the best interests of Delta and its shareowners for Delta (1) to
follow the most widely used practice for accounting for stock-based
compensation; and (2) to await consensus within the accounting profession
before adopting a material change to that practice. The Financial
Accounting Standards Board recently announced that it may formally
reconsider the current accounting for stock options. Thus, further
direction on this topic may be forthcoming in the relatively near future.
45
- The intrinsic value method permits investors to evaluate Delta's
financial performance both with and without the inclusion of stock
options as an expense because the impact of the potential expense is
disclosed in the notes to the consolidated financial statements.
Additionally, as required by GAAP, the dilutive effect of outstanding
stock options on earnings per share is reflected in Delta's consolidated
financial statements.
In sum, the Board of Directors believes that Delta should continue to use the
intrinsic value method until there is greater agreement and clarity with respect
to the accounting for stock options. ACCORDINGLY, THE BOARD RECOMMENDS A VOTE
AGAINST THIS PROPOSAL.
PROPOSAL 8
Captain John P. Ley, 10505 SE 13 Street, Vancouver, Washington 98664, who is the
beneficial owner of 276 shares of Common Stock and 149 shares of ESOP Preferred
Stock, has given notice that he intends to introduce the following resolution at
the annual meeting:
"RESOLVED, that the shareholders of Delta Air Lines, Inc. ("Delta") urge the
Personnel and Compensation Committee (the "Committee") to adopt and implement a
policy that net pension income not be included in calculating net income for
purposes of determining the amount of incentive compensation senior executives
receive."
PROPONENT'S SUPPORTING STATEMENT
"Under current accounting rules, a company is required to recognize in its
income statement the net pension cost associated with defined benefit pension
plans it sponsors. These "costs" -- which are determined by service cost;
interest cost; expected (not actual) return on plan assets; and amounts
representing amortization of various obligations, gains and losses -- may be
negative, in which case the pension plans are contributing income to a company's
bottom line.
This pension plan "income," however, will not be received by the company in cash
to be reinvested or otherwise used for the benefit of shareholders, creditors
and other stakeholders, since the law severely restricts the use of plan assets
by the plan sponsor. Nor will the pension income reduce dollar-for-dollar the
company's obligation to contribute to the pension plan in the future: Changes in
the value of plan assets are recognized in pension cost indirectly and over
time, due to the effect of "smoothing" provisions in the accounting rules.
In 2001, Delta recognized $73 million in net pension income, despite the fact
that its defined benefit pension plans went from being over funded in 2000 to
under funded in 2001 and despite an actual rate of return on plan assets of
-16%. According to a May 28, 2002 report in the Analyst's Accounting Observer,
Delta's 2001 pension income boosted the company's operating margins by 2.3%, the
twelfth-highest figure among S&P 100 companies. Although Delta's accounting
comports with accounting rules, I believe pension income distorts its reported
results.
According to the Committee's report in Delta's 2002 proxy statement, in January
2001, the Committee approved a compensation formula to determine the annual
incentive awards for senior executives, which takes into account both financial
and non-financial goals. The financial goals listed in the report are net income
and return on investment. Because the report does not state otherwise, I assume
that pension income is included in the net income figure used in the formula.
46
I believe that excluding pension income from the formula by which incentive
compensation is determined will ensure that senior executives are rewarded for
their success in managing Delta's business rather than for changes in the
financial statements that are unrelated to operating performance and generated
primarily by accounting assumptions. Excluding pension income will also limit
incentives for senior executives to reduce employee benefits and manipulate
accounting assumptions in a manner that could result in increased incentive
compensation.
To promote a closer relationship between senior executive pay and Delta's
operating performance, I urge shareholders to vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Delta's executive compensation program is designed to retain and attract highly
qualified executives, and to motivate them to achieve Delta's financial,
operational and strategic goals. This is especially important in the current
environment because the airline industry is facing significant challenges.
The Board of Directors believes it must have flexibility when making executive
compensation decisions to choose those performance goals and measures that best
meet Delta's business needs at any particular time. The proposal seeks to limit
the Board's discretion in this important respect.
The Board also believes that it would be inappropriate to preclude the use of
pension income as a component of net income which the Board may consider when
designing performance goals and measures for executive compensation purposes.
Returns on pension plan assets are a significant factor in determining pension
income, and strong returns on pension assets, over the long term:
- increase the security for plan beneficiaries; and
- reduce Delta's required contributions to those plans.
In sum, the Board of Directors believes that Delta's executive compensation
program is properly designed to motivate executives to achieve Delta's business
objectives, and to align their interests with shareowners. The Board also
believes this proposal would unnecessarily limit its discretion in this area.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROPOSAL 9
The Sheet Metal Workers' National Pension Fund, Edward F. Carlough Plaza, 601
North Fairfax Street, Suite 500, Alexandria, Virginia 22314-2075, which is the
beneficial owner of 2,300 shares of Common Stock, has given notice that it
intends to introduce the following resolution at the annual meeting:
AUDITOR CONFLICTS PROPOSAL
"RESOLVED, that the shareholders of Delta Air Lines ("Company") request that the
Board of Directors adopt a policy stating that the public accounting firm
retained by our Company to provide audit services, or any affiliated company,
should not also be retained to provide any management consulting services to our
Company."
47
PROPONENT'S STATEMENT OF SUPPORT
"The role of independent auditors in ensuring the integrity of the financial
statements of public corporations is fundamentally important to the efficient
and effective operation of the financial markets. The U.S. Securities and
Exchange Commission recently stated:
Independent auditors have an important public trust. Investors must be able to
rely on issuers' financial statements. It is the auditor's opinion that
furnishes investors with critical assurance that the financial statements have
been subjected to a rigorous examination by an objective, impartial, and skilled
professional, and that investors, therefore, can rely on them. If investors do
not believe that an auditor is independent of a company, they will derive little
confidence from the auditor's opinion and will be far less likely to invest in
that public company's securities. Final Rule: Revision of the Commission's
Auditor Independence Requirements, Release No. 33-7919, Feb. 5, 2001.
We believe that today investors seriously question whether auditors are
independent of the company and corporate management that retain them. A major
reason for this skepticism, we believe, is that management of once admired
companies such as Enron, Tyco, and WorldCom have misled investors and their
auditors have either been complicit or simply inept. Over the last year hundreds
of billions of dollars in market value have vanished as investors have lost
confidence in the integrity of our markets. A key reason for this lack of
confidence is the distrust investors have in companies' financial statements.
The U.S. Congress has attempted to respond to this crisis of confidence through
passage of the Sarbanes-Oxley Act of 2002 (the "Sarbanes Act"). The Sarbanes Act
prohibits a company's auditors from performing a wide range of defined non-audit
services. These prohibitions, in turn, track the defined non-audit services in
Rule 2-01(c)(4) of the SEC's Final Rule: Revision of the Commission's Auditor
Independence Requirements, Release No. 33-7919, Feb. 5, 2001.
However, the Sarbanes Act fails to prohibit auditors from providing management
consulting services, which we believe represents a significant loophole. While
the Act does require that the audit committee of the board preapprove these
non-audit services, we do not believe that is enough. We believe that management
consulting represents a significant source of potential revenue to auditors and
poses serious conflict of interest issues. For this reason, we think the better
course is for companies not to engage their auditors to perform any management
consulting services.
Many companies, including ours, either continue to engage their auditors to
provide management consulting or provide inadequate disclosure in their proxy
statements to ascertain whether they continue to engage their auditors for
management consulting services. We urge your support for this resolution asking
the board to cease engaging auditors for management consulting."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Board of Directors agrees that preserving the independence of the outside
auditor is critical in ensuring the integrity of the auditing process and
investor confidence in that process.
The Board disagrees with this proposal, however, because it seeks to address
concerns about auditor independence in an unduly rigid manner. The proposal
would prohibit Delta from retaining its outside auditor to perform any
"management consulting services," regardless of (1) the type or scope of
service; or (2) whether there is any risk that the auditor's performance of the
service would impact its independence.
48
The Board believes that Delta and its shareowners are better served by an
approach that is designed both (1) to maintain the outside auditor's
independence; and (2) to give Delta flexibility to retain the auditor to perform
management consulting and other non-audit services when appropriate. Key
elements of this approach include the following:
- Delta uses the outside auditor for management consulting services only if
(1) the auditor's particular expertise, or its knowledge of Delta,
substantially enhances its ability to provide high quality and timely
results in a cost-effective manner; and (2) the engagement is consistent
with maintaining the auditor's independence. These criteria are regularly
reviewed with the Audit Committee, which consists solely of directors who
are independent of Delta.
- Deloitte & Touche LLP, Delta's outside auditor, has processes in place to
ensure that its audits are conducted in an objective and impartial
manner, including (1) the mandatory rotation of the engagement partner on
each SEC audit client; (2) an independent concurring partner review of
each audit; and (3) periodic reviews by another major accounting firm of
the quality control systems for its accounting and auditing practice.
- Delta seeks shareowner ratification each year of the selection of the
outside auditor. The proxy statement discloses the fees paid by Delta to
the auditor for audit and non-audit services, and confirms that the Audit
Committee considered whether the auditor's provision of non-audit
services is compatible with maintaining its independence.
On January 22, 2003, the Securities and Exchange Commission adopted rules under
the Sarbanes-Oxley Act to strengthen the independence of the outside auditor.
These rules, among other things: (1) define nine non-audit services that an
outside auditor may not provide to an audit client; (2) require the audit
committee to pre-approve all audit and non-audit services provided by the
outside auditor; and (3) require public companies to disclose the non-audit
services approved by the audit committee. Delta will, of course, comply with
these requirements. In addition, the Sarbanes-Oxley Act establishes the Public
Accounting Oversight Board to oversee auditors of public companies.
In sum, the Board of Directors believes that the proposal's rigid approach is
both unnecessary and unwise, and that Delta and its shareowners are better
served by a process under which the Audit Committee retains the flexibility to
consider each non-audit engagement, including engagements for management
consulting services, on a case-by-case basis. ACCORDINGLY, THE BOARD RECOMMENDS
A VOTE AGAINST THIS PROPOSAL.
GENERAL INFORMATION
COST OF SOLICITATION
Delta will pay the cost of soliciting proxies. Delta has retained Georgeson
Shareholder Communications, Inc. to solicit proxies, by telephone, in person or
by mail, for a fee of $15,000 plus certain expenses. In addition, certain Delta
officers and employees, who will receive no compensation for their services
other than their regular salaries, may solicit proxies. Delta will also
reimburse banks, brokers and other nominees for their costs in forwarding proxy
materials to beneficial owners of Delta stock. Other proxy solicitation expenses
that Delta will pay include those for preparing, mailing, returning and
tabulating the proxies.
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SUBMISSION OF SHAREOWNER PROPOSALS
To be considered for inclusion in our proxy statement for the 2004 annual
meeting, shareowner proposals must be submitted in writing and received by us no
later than 5:00 p.m., local time, on November 26, 2003, at the following
address:
Robert S. Harkey, Secretary
Delta Air Lines, Inc.
Dept. No. 981
Post Office Box 20574
Atlanta, Georgia 30320
In addition, a shareowner may bring business before the annual meeting, other
than a proposal included in the proxy statement, or may submit nominations for
directors, if the shareowner complies with the requirements specified in Delta's
By-Laws. The requirements include:
- providing written notice that is received by Delta's Secretary between
December 27, 2003 and January 26, 2004 (subject to adjustment if the date
of the 2004 annual meeting is substantially moved, as provided in the
By-Laws); and
- supplying the additional information listed in Section 3.1 and, for
nominations for directors, Section 4.2, of Delta's By-Laws.
The By-Laws are available on Delta's website at :
www.delta.com/inside/investors/corp_info/corp_governance/index.jsp.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Delta's directors,
executive officers and persons who beneficially own more than 10% of a
registered class of Delta's equity securities ("reporting persons") to file
certain reports concerning their beneficial ownership of Delta's equity
securities. Delta believes that during 2002 all reporting persons complied with
their Section 16(a) filing obligations, except that one filing on behalf of Mr.
James L. Broadhead reporting the deferral of director meeting fees paid on
December 18, 2002 was filed on January 27, 2003. The delay in filing Mr.
Broadhead's report was due to a miscommunication within Delta, which had assumed
responsibility for the filing.
EXTENT OF INCORPORATION BY REFERENCE OF MATERIALS INCLUDED IN
OR ACCOMPANYING THIS PROXY STATEMENT
The reports of the Audit Committee and Personnel & Compensation Committee
included in this proxy statement shall not be deemed to be incorporated by
reference into any filing made by Delta under the Securities Act of 1933 or the
Securities Exchange Act of 1934, notwithstanding any general statement contained
in any such filing incorporating this proxy statement by reference, except to
the extent Delta incorporates such reports by specific reference.
This proxy statement is accompanied or preceded by Delta's Annual Report to
Shareowners for the year ended December 31, 2002. The annual report, which
contains audited financial statements, along with other information about Delta,
is not incorporated in the proxy statement and is not to be deemed a part of the
proxy soliciting material.
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APPENDIX A
SUMMARY OF DELTA 2000 PERFORMANCE COMPENSATION PLAN
In 2000, the Board of Directors adopted, with shareowner approval, the Delta
2000 Performance Compensation Plan ("2000 Plan"). The 2000 Plan is designed to
enable Delta to attract and retain a highly qualified management team, and to
motivate these executives to achieve Delta's overall business and financial
goals.
The 2000 Plan became effective on October 25, 2000. It amended and restated as
one plan Delta's two prior shareowner approved executive compensation plans.
The 2000 Plan contains various features which the Board of Directors believes
are consistent with shareowner protection and appropriate corporate governance
practices. See "Shareowner Protection and Corporate Governance Practices" below.
The following summary of the 2000 Plan is qualified in its entirety by reference
to the full text of the 2000 Plan, a copy of which is available at Delta's
website at www.delta.com/inside/investors/corp_info/corp_governance/index.jsp or
upon request to Delta's Secretary.
The Board of Directors has adopted, subject to shareowner approval, amendments
to the 2000 Plan, as well as Delta's two broad-based employee stock option
plans, to authorize a stock option exchange program. These amendments are
described in Proposal 3 of this proxy statement.
ADMINISTRATION
The 2000 Plan is administered by the Personnel & Compensation Committee
("Committee") of the Board of Directors. Subject to the terms of the 2000 Plan,
the Committee may interpret the plan; prescribe rules and regulations under the
plan; grant awards under the plan; establish the terms and conditions of those
awards; and take all other actions it deems necessary for the proper operation
or administration of the 2000 Plan. The Committee may delegate its authority,
subject to certain limitations.
ELIGIBILITY
Awards may be granted to employees of Delta and its subsidiaries, as determined
by the Committee.
Under the amendments to the 2000 Plan, the Committee will determine those option
holders eligible to participate in the stock option exchange program. No member
of the Board of Directors may participate in the exchange program, including Mr.
Mullin, Delta's Chairman of the Board and Chief Executive Officer.
NUMBER OF SHARES
The 2000 Plan provides for the issuance of up to 16 million shares of Common
Stock for awards granted on or after October 25, 2000. As of February 28, 2003,
options for the issuance of approximately 21.1 million shares of Common Stock
were outstanding under the 2000 Plan, including options for approximately 11
million shares that were granted prior to October 25, 2000 under a predecessor
plan. The Common Stock granted under the 2000 Plan may be authorized and
unissued shares, or treasury shares.
A-1
Shares of Common Stock issued, or reserved for issuance, for awards granted on
or after October 25, 2000 are subtracted from the number of shares available for
issuance. Shares of Common Stock obtained from the following sources are added
to the total number of shares available for issuance: (1) shares tendered to
exercise an award; (2) shares withheld for taxes in connection with an award;
(3) shares that are settled in cash; and (4) shares relating to an award that is
forfeited. The preceding sentence also applies to shares of Common Stock that
are tendered, withheld, settled in cash or forfeited with respect to awards
granted under the predecessor plan that were outstanding on October 25, 2000.
Proposal 3 in this proxy statement requests shareowner approval for amendments
to the 2000 Plan that would add back to the number of shares available for grant
under that plan the number of shares subject to stock options that were
originally granted under the 2000 Plan or a predecessor plan and that are
canceled pursuant to the stock option exchange program commenced under the
amendments.
TYPES OF AWARDS
The Committee may grant the following four types of awards under the 2000 Plan:
incentive awards; stock options; restricted stock; and other equity-based
awards.
INCENTIVE AWARDS
Incentive awards reward participants for achieving goals, for an annual or other
performance period, that are considered key to Delta's success. These awards may
be paid in cash or Common Stock. The incentive award paid to any participant for
a calendar year may not exceed $3 million, multiplied by the number of years in
the performance period relating to the incentive award paid in that calendar
year.
STOCK OPTIONS
The Committee may grant non-qualified stock options and incentive stock options
having an exercise price not less than the fair market value of a share of
Common Stock on the date the option is granted.
A stock option is exercisable at such times and subject to such terms and
conditions as the Committee may determine. No stock option is exercisable
earlier than one year from its grant date, except in the case of (1) a
participant's death or termination of employment; or (2) a Change in Control of
Delta. No stock option is exercisable later than ten years after its grant date.
No more than one million shares of Common Stock subject to stock options may be
granted to any participant in a calendar year.
RESTRICTED STOCK
Restricted stock is an award of Common Stock that is subject to restrictions and
such other terms and conditions as the Committee may determine. No restricted
stock award may vest less than one year from its date of grant, except in the
case of (1) a participant's death or termination of employment; or (2) a Change
in Control of Delta. No more than 400,000 shares of Common Stock in the form of
restricted stock may be granted to any participant in a calendar year.
A-2
OTHER EQUITY-BASED AWARDS
The Committee may also grant other types of awards that are valued in whole or
in part by reference to, or are otherwise based on, the Common Stock. These
awards are subject to such terms and conditions as the Committee may determine.
No more than 400,000 shares of Common Stock subject to other equity-based awards
may be granted to any participant in a calendar year.
PERFORMANCE MEASURES
The 2000 Plan lists the performance measures the Committee may use to make
performance-based awards under Section 162(m) of the Internal Revenue Code.
These performance measures include specified financial measures; the results of
employee or customer satisfaction surveys; and other measures of quality,
safety, productivity or process improvement. The performance measures may be
determined by reference to (1) the performance of Delta; one or more of its
subsidiaries; or a division or unit of Delta or one or more of its subsidiaries;
or (2) comparisons of any of the performance measures relative to other
companies or indices.
AMENDMENT AND TERMINATION
The Committee or the Board of Directors may amend or terminate the 2000 Plan at
any time, but no such amendment or termination may impair the rights of a
participant with respect to an outstanding award without that participant's
consent. No incentive stock options may be granted after October 23, 2010. As
discussed below in "Shareowner Protection and Corporate Governance Practices,"
shareowner approval is required for certain amendments to the 2000 Plan.
ADJUSTMENTS
In the event of a change in the outstanding shares of Common Stock, the
Committee may take certain actions to prevent the dilution or enlargement of
benefits under the 2000 Plan.
CHANGE IN CONTROL
Upon the occurrence of a Change in Control of Delta, (1) all outstanding stock
options, non-performance based restricted stock and non-performance based other
equity-based awards will become immediately exercisable, vested and
nonforfeitable; and (2) target incentive awards and outstanding
performance-based restricted stock and performance-based other equity-based
awards will be paid on a prorated basis as specified in the 2000 Plan.
Change in Control is generally defined as (1) the acquisition by any person of
20% or more of the combined voting power of Delta stock; (2) a change in the
composition of the Board of Directors such that the persons who were directors
at the beginning of any two-year period prior to October 25, 2000 (and any new
director whose election was approved by at least two-thirds of directors then
still in office who either were directors at the beginning of the period or
whose election was so approved) cease to constitute a majority of the Board of
Directors; (3) a reorganization, merger or consolidation of Delta, other than in
certain circumstances; or (4) the approval by Delta's shareowners of a complete
liquidation or dissolution of Delta, or a sale of all or substantially all the
assets of Delta other than in certain circumstances.
A-3
SHAREOWNER PROTECTION AND CORPORATE GOVERNANCE PRACTICES
The 2000 Plan contains the following features which the Board of Directors
believes are consistent with shareowner protection and appropriate corporate
governance practices.
No Stock Option Repricings. It prohibits, absent shareowner approval, a
reduction in the exercise price of outstanding stock options, either by lowering
the exercise price or by canceling an outstanding stock option and granting a
replacement stock option with a lower exercise price.
No Discount Stock Options. It prohibits, absent shareowner approval, the grant
of a stock option with an exercise price less than the fair market value of the
Common Stock on the date the stock option is granted.
No Stock Option Exercise Extensions. It prohibits, absent shareowner approval,
the extension of the regular expiration date for the exercise of a stock option.
Limitation on Shares Issued Other Than for Stock Options. It limits to three
million the number of shares of Common Stock that may be issued for awards,
other than stock options, granted on or after October 25, 2000.
No Evergreen Provision. It does not contain an "evergreen provision" - there is
no automatic provision to replenish the shares of Common Stock authorized for
issuance under the 2000 Plan based on the number or percentage of shares of
Common Stock outstanding.
The amendments to the 2000 Plan would authorize Delta to conduct a one-time
stock option exchange program in accordance with the terms described in Proposal
3 of this proxy statement.
FEDERAL INCOME TAX ASPECTS OF THE 2000 PLAN
The following is a brief summary of the U.S. federal income tax consequences of
non-qualified stock options under the 2000 Plan. With respect to such stock
options: (1) no income is realized by the participant at the time the stock
option is granted; (2) upon exercise of the stock option, the participant
realizes ordinary income in an amount equal to the excess of the fair market
value on the date of exercise of the shares of Common Stock purchased over the
exercise price for those shares, and Delta is entitled to a tax deduction in the
same amount; (3) Delta is required to comply with applicable federal income tax
withholding requirements with respect to the amount of ordinary income
recognized by the participant; and (4) at disposition, any appreciation (or
depreciation) after the date of exercise is treated either as short-term or
long-term capital gain (or a capital loss), depending upon the length of time
that the participant has held the shares.
A-4
APPENDIX B
SUMMARY OF DELTASHARE STOCK OPTION PLAN AND PILOTS STOCK OPTION PLAN
In 1996, the Board of Directors adopted, with shareowner approval, two
broad-based, non-qualified stock option plans for Delta personnel, providing for
the issuance of stock options to purchase an aggregate of 49.4 million shares of
Common Stock, as adjusted for a stock split in 1998. The DeltaShare Stock Option
Plan provided for the issuance of stock options to Delta personnel who were not
pilots ("Nonpilots Plan"). The Pilots Stock Option Plan provided for the
issuance of options to Delta pilots ("Pilots Plan"). These plans are commonly
referred to within Delta as "SkyShares."
The Nonpilots and Pilots Plans were intended to strengthen the link between
employee compensation and Delta's performance, and to more closely align the
interests of Delta's employees and shareowners. The Pilots Plan was an integral
part of the collective bargaining agreement entered into in 1996 between Delta
and the Air Line Pilots Association, International, the collective bargaining
representative for Delta's pilots ("ALPA").
The following summary of the Nonpilots and Pilots Plans is qualified in its
entirety by reference to the full text of the plans, copies of which are
available at Delta's website at
www.delta.com/inside/investors/corp_info/corp_governance/index.jsp or upon
request to Delta's Secretary.
The Board of Directors has adopted, subject to shareowner approval, amendments
to the Nonpilots and Pilots Plans, as well as Delta's 2000 Performance
Compensation Plan, to authorize a stock option exchange program. These
amendments are described in Proposal 3 of this proxy statement.
STOCK OPTIONS
Under the Nonpilots and Pilots Plans, Delta granted non-qualified stock options
in three annual installments to purchase a total of 29.4 million and 20 million
shares of Common Stock, respectively, to eligible Delta personnel. Stock option
grants were made in 1996, 1997 and 1998 at exercise prices of $34.50, $49.00 and
$50.5938, respectively (the fair market value of the Common Stock on the
applicable grant date).
The number of shares of Common Stock subject to stock options under the Pilots
Plan was negotiated by Delta and ALPA. The Board of Directors determined the
size of the Nonpilots Plan to provide an equivalent potential benefit for
nonpilots under the Nonpilots Plan as pilots received under the Pilots Plan, as
a percentage of each group's respective base salary.
The amendments to the Nonpilots and Pilots Plans would authorize the grant of
replacement stock options under those plans. The excess number of stock options
surrendered in an exchange over the fewer number of replacement options granted
under these plans would not be available for future grants.
ADMINISTRATION
The plans are administered by the Personnel & Compensation Committee
("Committee") of the Board of Directors of Delta. Subject to the terms of the
plans, the Committee may construe and interpret the plans; establish rules and
regulations relating to the plans; and take all actions in connection with the
plans as it may deem necessary, appropriate or advisable to carry out the
provisions of the plans. The Pilots Plan provides that disputes arising out of
Committee actions
B-1
with respect to the interpretation, administration or application of the Pilots
Plan are subject to certain dispute resolution procedures in the pilot
collective bargaining agreement.
ELIGIBILITY
The Committee determined the Delta personnel who were granted options under the
Nonpilots Plan. Participants in the Nonpilots Plan generally included all Delta
domestic nonpilot personnel, and international personnel not subject to a
collective bargaining agreement, in permanent positions who had at least one
year of Delta employment and were on active pay status on the applicable grant
date. Officers, directors and participants in other Delta sponsored stock option
plans could not participate in the Nonpilots Plan.
Participation in the Pilots Plan was limited to Delta pilots on the applicable
grant date and certain Delta pilots who retired. ALPA determined the
participants in the Pilots Plan.
EXERCISABILITY
Stock options awarded under the Nonpilots and Pilots Plans are exercisable
beginning one year, and ending ten years, after the applicable grant date. Under
the plans, a participant (1) whose employment is terminated by Delta for reasons
other than retirement, death, disability, leave of absence or furlough, or (2)
who resigns from employment with Delta, must immediately forfeit his or her
unexercised stock options.
As described in Proposal 3 of this proxy statement under "Description of the
Amendments and the Exchange Program," the amendments to the Nonpilots and Pilots
Plans would provide that each replacement option would be exercisable in full
beginning one year from its grant date and have a term equal to the remaining
term of the options surrendered for cancellation.
NONTRANSFERABILITY
Stock options granted under the plans are not transferable other than upon the
death of the participant.
ADJUSTMENTS
In the event of any merger, reorganization, consolidation, recapitalization,
Common Stock dividend, Common Stock split or other change in corporate structure
affecting the Common Stock, the Committee may make such adjustments as it deems
necessary to reflect such change so as to prevent the diminution or enlargement
of a participant's rights including, but not limited to, adjustments in (1) the
number of shares of Common Stock available for distribution under the Plans and
(2) the exercise price per share of a stock option.
COMMON STOCK
Shares of Common Stock distributed under the Plans may be either authorized and
unissued shares or treasury shares.
AMENDMENTS
The Board of Directors or the Committee may amend, alter or discontinue the
Nonpilots Plan at any time, but no amendment, alteration or discontinuation may
impair the rights of a participant in that plan with respect to a previously
granted stock option without the participant's consent. The Pilots Plan may be
amended by mutual agreement between Delta and ALPA.
B-2
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the U.S. federal income tax consequences of
non-qualified stock options under the plans. With respect to such stock options:
(1) no income is realized by the participant at the time the stock option is
granted; (2) upon exercise of the stock option, the participant realizes
ordinary income in an amount equal to the excess of the fair market value on the
date of exercise of the shares of Common Stock purchased over the exercise price
for those shares, and Delta is entitled to a tax deduction in the same amount;
(3) Delta is required to comply with applicable federal income tax withholding
requirements with respect to the amount of ordinary income recognized by the
participant; and (4) at disposition, any appreciation (or depreciation) after
the date of exercise is treated either as short-term or long-term capital gain
(or a capital loss), depending upon the length of time that the participant has
held the shares.
B-3
RECYCLED PAPER LOGO
DELTA AIR LINES, INC.
ANNUAL MEETING OF SHAREOWNERS
FRIDAY, APRIL 25, 2003
10:30 A.M. LOCAL TIME
THE PLAZA HOTEL
FIFTH AVENUE AT CENTRAL PARK SOUTH
NEW YORK, NEW YORK 10019
If you consented to access your proxy information electronically, you may view
that information at Delta's website at:
http://www.delta.com/inside/investors/annual_reports/index.jsp
If you would like to receive the proxy materials electronically next year,
sign-up at: http://www.econsent.com/dal/
DELTA LOGO PROXY
-------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF DELTA AIR LINES, INC.
I hereby appoint Edward H. Budd, Gerald Grinstein and Leo F. Mullin, and each
of them, as proxies with full power of substitution, for and in the name of the
undersigned, to vote all shares of Common Stock of Delta Air Lines, Inc. which
I would be entitled to vote on all matters which may properly come before the
2003 Annual Meeting of Shareowners of Delta to be held at The Plaza Hotel,
Fifth Avenue at Central Park South, New York, New York 10019, on Friday, April
25, 2003 at 10:30 a.m., local time, or any adjournment of the meeting.
THE PROXIES SHALL VOTE SUBJECT TO THE DIRECTIONS INDICATED ON THE REVERSE SIDE
OF THIS PROXY CARD, AND THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION
UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT OF THE MEETING. THE PROXIES WILL VOTE AS THE BOARD OF DIRECTORS
RECOMMENDS WHERE A CHOICE IS NOT SPECIFIED. THE PROXIES CANNOT VOTE YOUR SHARES
UNLESS YOU SIGN, DATE AND RETURN THIS PROXY CARD OR VOTE BY THE INTERNET OR
TELEPHONE.
I acknowledge receipt of Delta's Notice of Annual Meeting of Shareowners, dated
March 25, 2003, Proxy Statement and Annual Report.
See reverse for voting instructions.
THERE ARE THREE WAYS TO VOTE YOUR PROXY
COMPANY #
CONTROL #
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the
last 4 digits of the Social Security Number (SSN) or Tax Identification
Number (TIN) for this account. If you do not have a SSN or TIN, please
enter 4 zeros.
- Follow the simple instructions provided.
VOTE BY INTERNET - http://www.eproxy.com/dal/ - QUICK *** EASY *** IMMEDIATE
- Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the proxy card) and the
last 4 digits of the Social Security Number (SSN) or Tax Identification
Number (TIN) for this account to obtain your records and create an
electronic ballot. If you do not have a SSN or TIN, please leave blank.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to DELTA AIR LINES, c/o Shareowner Services(SM), P.O. Box
64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL NOMINEES AND FOR PROPOSALS 2 AND 3.
1. Election of Nominees 01 Edward H. Budd 04 Gerald Grinstein 07 John F. Smith, Jr. [ ] Vote FOR [ ] Vote WITHHELD
for Director: 02 George M.C. Fisher 05 James M. Kilts 08 Joan E. Spero all nominees from all
03 David R. Goode 06 Leo F. Mullin 09 Andrew J. Young (except as nominees
marked)
__________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |__________________________|
-- PLEASE FOLD HERE --
2. To ratify the appointment of Deloitte & Touche LLP as independent auditors [ ] FOR [ ] AGAINST [ ] ABSTAIN
for the year ending December 31, 2003.
3. To approve amendments to the Delta 2000 Performance Compensation Plan, the [ ] FOR [ ] AGAINST [ ] ABSTAIN
DeltaShare Stock Option Plan and the Pilots Stock Option Plan to authorize a
stock option exchange program.
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSALS 4, 5, 6, 7, 8 AND 9, WHICH WERE SUBMITTED BY SHAREOWNERS.
4. Related to cumulative voting for directors. [ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Related to executive severance agreements. [ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Related to indexing executive stock option grants. [ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Related to the expensing of stock options. [ ] FOR [ ] AGAINST [ ] ABSTAIN
8. Related to excluding net pension income from net income in determining [ ] FOR [ ] AGAINST [ ] ABSTAIN
executive incentive compensation.
9. Related to the independent auditor providing management consulting services. [ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5, 6,
7, 8 AND 9.
Address Change? Mark Box [ ] Indicate changes below: [ ] Yes, I plan to attend the Annual Meeting of Shareowners
Date
-----------------------------------
______________________________________
| |
| |
|______________________________________|
Signature(s) in Box
Please sign exactly as your name(s)
appears on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the proxy.
[DELTA LOGO]
INTERNAL MEMORANDUM
DATE: March 25, 2003
TO: Participants in the Delta Family-Care Savings Plan
FROM: Leo F. Mullin, Chairman and Chief Executive Officer
SUBJECT: DELTA'S 2003 ANNUAL MEETING OF SHAREOWNERS
As a participant in the Delta Family-Care Savings Plan (Savings Plan), you have
the right to provide confidential instructions to Fidelity Management Trust
Company, the Savings Plan trustee (Trustee), on how to vote the Delta stock
attributable to your Savings Plan account, at Delta's 2003 Annual Meeting of
Shareowners. I strongly encourage you to exercise this right because together we
can shape Delta's future. Your vote is important!
Delta's Board of Directors recommends that you vote:
- FOR the election of the 9 nominees for Director named in the
proxy statement (Proposal 1);
- FOR the ratification of the appointment of Deloitte & Touche
LLP as independent auditors for the calendar year ending
December 31, 2003 (Proposal 2); and
- FOR the amendments to the Delta 2000 Performance Compensation
Plan, the DeltaShare Stock Option Plan and the Pilots Stock
Option Plan to authorize a stock option exchange program
(Proposal 3); and
- AGAINST each of the six shareowner proposals described in the
proxy statement (Proposals 4 thru 9).
To instruct the Trustee how to vote the Delta stock attributable to your Savings
Plan account, please use the Internet or telephone voting instruction system
described on the attachment to the enclosed Voting Instruction Form.
Alternatively, you may complete, sign and date the Voting Instruction Form and
return it in the enclosed envelope.
If you plan to attend the Annual Meeting, please indicate your intent when
prompted by the Internet or telephone voting instruction system, or mark the
appropriate box on the Voting Instruction Form. TO ATTEND THE MEETING, YOU WILL
NEED TO PRESENT THE ENCLOSED ADMISSION TICKET AND VALID PICTURE IDENTIFICATION.
AN EMPLOYEE IDENTIFICATION CARD IS NOT SUFFICIENT PROOF OF SHARE OWNERSHIP.
PLEASE CONTACT INVESTOR RELATIONS AT (404) 715-2343 OR (866) 715-2170 TO REQUEST
A REPLACEMENT ADMISSION TICKET, IF NEEDED.
The Annual Meeting will be broadcast live online (listen only) on April 25, 2003
at 10:30 a.m. ET at www.delta.com/inside/investors/index.jsp. A replay of the
Web cast will be available through May 25, 2003.
Enclosed is a copy of Delta's Notice of Annual Meeting of Shareowners, Proxy
Statement and Annual Report. If you would like to receive future annual meeting
materials electronically, you may do so by enrolling at
www.delta.com/inside/investors/index.jsp.
/s/ Leo
-----------------
Leo F. Mullin
Enclosures
[DELTA LOGO]
ADMISSION TICKET
2003 Annual Meeting of Shareowners
April 25, 2003 at 10:30 a.m. at
The Plaza Hotel, Fifth Avenue at Central Park South, New York, New York 10019
This admission ticket is required to attend the meeting. This ticket admits
only the shareowner(s) listed on the reverse side. Each shareowner may be asked
to present valid picture identification, such as a driver's license. Cameras,
recording devices and other electronic devices will not be permitted at the
meeting.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS BY TELEPHONE OR INTERNET, DO NOT RETURN
YOUR VOTING INSTRUCTION FORM.
THANK YOU FOR VOTING.
-------------------------------------------------------------------------------
DELTA FAMILY-CARE SAVINGS PLAN VOTING INSTRUCTION FORM
THIS VOTING INSTRUCTION FORM IS PROVIDED BY FIDELITY MANAGEMENT TRUST COMPANY,
AS TRUSTEE (TRUSTEE) FOR THE DELTA FAMILY-CARE SAVINGS PLAN (SAVINGS PLAN), for
the 2003 Annual Meeting of Shareowners of Delta Air Lines, Inc. (Delta) to be
held at The Plaza Hotel, Fifth Avenue at Central Park South, New York, New York
10019, on Friday, April 25, 2003 at 10:30 a.m. local time, or any adjournment
of the meeting.
I understand that, under the Savings Plan, I have the right to confidentially
instruct the Trustee how to vote shares of Delta's Series B ESOP Convertible
Preferred Stock and Common Stock attributable to my Savings Plan account. I
also understand that Delta's Proxy Statement describes how the Trustee will
vote (1) such shares attributable to my Savings Plan account if the Trustee
does not receive voting instructions from me on or before 5:00 p.m. ET on April
23, 2003; and (2) shares of Delta's Series B ESOP Convertible Preferred Stock
that were not allocated to any participant's Savings Plan account on the
February 28, 2003 record date for the annual meeting.
Pursuant to the Savings Plan, I instruct the Trustee to vote the shares of
Delta's Series B ESOP Convertible Preferred Stock and Common Stock attributable
to my Savings Plan account at the annual meeting, as indicated on the reverse
of this form.
I acknowledge receipt of Delta's Notice of Annual Meeting of Shareowners, dated
March 25, 2003, Proxy Statement and Annual Report.
ADDRESS CHANGES/COMMENTS:
--------------------------------------------
---------------------------------------------------------------------
(If you noted any Address Changes/Comments above,
please mark corresponding box on the reverse side.)
[DELTA LOGO] VOTE BY INTERNET - www.proxyvote.com
-----------------
Use the Internet to transmit your voting instructions
DELTA AIR LINES and for electronic delivery of information up until
C/O PROXY SERVICES 5:00 P.M. Eastern Time on April 23, 2003. Have your
P.O. BOX 9112 voting instruction form available when you access the
FARMINGDALE, NY 11735 website. You will be prompted to enter your 12-digit
Control Number which is located below to obtain your
records and create an electronic voting instruction
form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 5:00 P.M. Eastern Time on April
23, 2003. Have your voting instruction form available
when you call. You will be prompted to enter your
12-digit Control Number which is located below and
then follow the simple instructions the Vote Voice
provides.
VOTE BY MAIL
Mark, sign and date your voting instruction form and
return it in the postage-paid envelope, or to Delta
Air Lines, Inc., c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: DLTAIR KEEP THIS PORTION FOR YOUR RECORDS
----------------------------------------------------------------------------------------------------------------------------
THIS VOTING INSTRUCTION FORM IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
DELTA FAMILY-CARE SAVINGS PLAN
VOTING INSTRUCTION FORM
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL NOMINEES.
Write the number of the
FOR WITHHOLD FOR ALL nominee(s) for which
ALL VOTE FOR EXCEPT you withhold authority on
ALL the line below.
1. Election of Nominees for Director
1-Edward H. Budd, 2-George M.C. Fisher, 3-David R. Goode, [ ] [ ] [ ] --------------------------
4-Gerald Grinstein, 5-James M. Kilts, 6-Leo F. Mullin,
7-John F. Smith, Jr., 8-Joan E. Spero, 9-Andrew J. Young
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 2 AND 3.
FOR AGAINST ABSTAIN
2. To ratify the appointment of Deloitte & Touche [ ] [ ] [ ]
LLP as independent auditors for the year ending
December 31, 2003.
3. To approve amendments to the Delta 2000 [ ] [ ] [ ]
Performance Compensation Plan, the
DeltaShare Stock Option Plan and the Pilots
Stock Option Plan to authorize a stock option
exchange program.
DELTA'S BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST PROPOSALS 4, 5, 6, 7, 8 AND
9, WHICH WERE SUBMITTED BY SHAREOWNERS. FOR AGAINST ABSTAIN
4. Related to cumulative voting for directors. [ ] [ ] [ ]
5. Related to executive severance agreements. [ ] [ ] [ ]
6. Related to indexing executive stock option
grants. [ ] [ ] [ ]
7. Related to the expensing of stock options. [ ] [ ] [ ]
8. Related to excluding net pension income from
net income in determining executive incentive
compensation. [ ] [ ] [ ]
9. Related to the independent auditor providing
management consulting services. [ ] [ ] [ ]
These instructions, if properly executed and delivered, will revoke all prior
instructions. PLEASE SIGN, DATE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Change of Address and/or Comments Mark Here and note on
the reverse side [ ]
Please indicate if you plan to attend this meeting. [ ] [ ]
YES NO
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Signature [PLEASE SIGN WITHIN BOX] Date
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Signature (Joint Owners) Date
[DELTA LOGO]
ADMISSION TICKET
2003 Annual Meeting of Shareowners
April 25, 2003 at 10:30 a.m. at
The Plaza Hotel, Fifth Avenue at Central Park South, New York, New York 10019
This admission ticket is required to attend the meeting. This ticket admits
only the shareowner(s) listed on the reverse side. Each shareowner may be asked
to present valid picture identification, such as a driver's license. Cameras,
recording devices and other electronic devices will not be permitted at the
meeting.
THANK YOU FOR VOTING.
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ATLANTIC SOUTHEAST AIRLINES, INC. INVESTMENT SAVINGS PLAN
VOTING INSTRUCTION FORM
THIS VOTING INSTRUCTION FORM IS PROVIDED BY JP. MORGAN/CHASE, AS TRUSTEE
(TRUSTEE) FOR THE ATLANTIC SOUTHEAST AIRLINES, INC. INVESTMENT SAVINGS PLAN
(SAVINGS PLAN), for the 2003 Annual Meeting of Shareowners of Delta Air Lines,
Inc. (Delta) to be held at The Plaza Hotel, Fifth Avenue at Central Park South,
New York, New York 10019, on Friday, April 25, 2003 at 10:30 a.m. local time,
or any adjournment of the meeting.
I understand that, under the Savings Plan, I have the right to confidentially
instruct the Trustee how to vote shares of Delta's Common Stock attributable to
my Savings Plan account. Pursuant to the Savings Plan, I instruct the Trustee to
vote the shares of Delta's Common Stock attributable to my Savings Plan account
at the annual meeting, as indicated on the reverse of this form.
I acknowledge receipt of Delta's Notice of Annual Meeting of Shareowners, dated
March 25, 2003, Proxy Statement and Annual Report.
ADDRESS CHANGES/COMMENTS:
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(If you noted any Address Changes/Comments above, please mark corresponding box
on the reverse side.)
(DELTA LOGO) VOTE BY MAIL
DELTA AIR LINES Mark, sign and date your voting instruction form and
C/O PROXY SERVICES return it in the postage-paid envelope, or to Delta Air
P.O. BOX 9112 Lines, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY
FARMINGDALE, NY 11735 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ATLAIR KEEP THIS PORTION FOR YOUR RECORDS
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THIS VOTING INSTRUCTION FORM IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
ATLANTIC SOUTHEAST AIRLINES, INC.
INVESTMENT SAVINGS PLAN
VOTING INSTRUCTION FORM
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL NOMINEES.
Write the number of the
FOR WITHHOLD FOR ALL nominee(s) for which
ALL VOTE FOR EXCEPT you withhold authority on
ALL the line below.
1. Election of Nominees for Director
1-Edward H. Budd, 2-George M.C. Fisher, 3-David R. Goode, [ ] [ ] [ ] --------------------------
4-Gerald Grinstein, 5-James M. Kilts, 6-Leo F. Mullin,
7-John F. Smith, Jr., 8-Joan E. Spero, 9-Andrew J. Young
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 2 AND 3.
FOR AGAINST ABSTAIN
2. To ratify the appointment of Deloitte & Touche [ ] [ ] [ ]
LLP as independent auditors for the year ending
December 31, 2003.
3. To approve amendments to the Delta 2000 [ ] [ ] [ ]
Performance Compensation Plan, the
DeltaShare Stock Option Plan and the Pilots
Stock Option Plan to authorize a stock option
exchange program.
DELTA'S BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST PROPOSALS 4, 5, 6, 7, 8 AND
9, WHICH WERE SUBMITTED BY SHAREOWNERS. FOR AGAINST ABSTAIN
4. Related to cumulative voting for directors. [ ] [ ] [ ]
5. Related to executive severance agreements. [ ] [ ] [ ]
6. Related to indexing executive stock option
grants. [ ] [ ] [ ]
7. Related to the expensing of stock options. [ ] [ ] [ ]
8. Related to excluding net pension income from
net income in determining executive incentive
compensation. [ ] [ ] [ ]
9. Related to the independent auditor providing
management consulting services. [ ] [ ] [ ]
These instructions, if properly executed and delivered, will revoke all prior
instructions. PLEASE SIGN, DATE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Change of Address and/or Comments Mark Here and note on
the reverse side [ ]
Please indicate if you plan to attend this meeting [ ] [ ]
YES NO
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Signature [PLEASE SIGN WITHIN BOX] Date
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Signature (Joint Owners) Date
PROXY TABULATOR
P.O. BOX 9132
HINGHAM, MA 02043-9132
LABEL BELOW FOR MIS USE ONLY!
PO# K8339
DREYFUS 401(K) #305
COMAIR/DELTA AIR LINES, INC. #030
ORIGINAL 1-UP 3-11-03 JA
CAROL (305030F)
REVIEW #1 3/19/03 TD
VOTING INSTRUCTION FORM
PLEASE MARK, SIGN, DATE AND RETURN THE VOTING INSTRUCTION FORM PROMPTLY USING
THE ENCLOSED ENVELOPE
This voting instruction is requested by The Dreyfus Trust Company in
conjunction with a proxy solicitation by the
Board of Directors of Delta Air Lines, Inc.
Please read the enclosed Proxy Statement and the Annual Report to Shareowners
for more information.
CONFIDENTIAL VOTING INSTRUCTION FORM
TO: THE DREYFUS TRUST COMPANY
AS TRUSTEE OF THE COMAIR, INC. SAVINGS AND INVESTMENT PLAN
The undersigned hereby instructs The Dreyfus Trust Company, as Trustee of the
Comair, Inc. Savings and Investment Plan, to vote in person or by proxy at the
Annual Meeting of the Shareowners of Delta Air Lines, Inc. to be held on April
25, 2003, and at any adjournment or postponement thereof, all shares of Common
Stock of Delta Air Lines, Inc. for which the undersigned shall be entitled to
instruct, in the manner specified on the reverse side.
The Dreyfus Trust Company will vote the shares of Common Stock represented by
this Voting Instruction Form if it is properly completed, signed, and received
by The Dreyfus Trust Company before 5:00 p.m. EDT on April 22, 2003 at P.O. Box
9132, Hingham, MA 02043. Please note that if this Voting Instruction Form is
not properly completed and signed, or it is not received by The Dreyfus Trust
Company as indicated above, shares allocated to a participant's account will
not be voted.
The Dreyfus Trust Company makes no recommendation regarding any voting
instruction.
Date , 2003
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SIGNATURE (SIGN IN THE BOX)
LABEL BELOW FOR MIS USE ONLY!
PO# K8339
DREYFUS 401(K) #305
COMAIR/DELTA AIR LINES, INC. #030
ORIGINAL 1-UP 3-11-03 JA
CAROL (305030B)
REVISION #1 3-14-03 KD
OA 3/19/03 TD
REVISION #1 3/20/03 TD
PLEASE FILL IN BOX(ES) AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2
PENCIL. X
-
PLEASE DO NOT USE FINE POINT PENS.
DELTA'S BOARD OF DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR PROPOSALS 2
AND 3.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
(noted at left)
1. ELECTION OF DIRECTORS
(01) Edward H. Budd, (02) George M.C. Fisher, (03) David R. Goode, (04)
Gerald Grinstein, (05) James M. Kilts, (06) Leo F. Mullin, (07) John F.
Smith, Jr., (08) Joan E. Spero, (09) Andrew J. Young
--- --- ---
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(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEES MARK FOR AGAINST ABSTAIN
THE "FOR ALL EXCEPT" BOX AND WRITE THAT NOMINEE'S NAME ABOVE. YOUR SHARES WILL
BE VOTED FOR THE REMAINING NOMINEES.)
2. To ratify the appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 2003.
--- --- ---
3. To approve amendments to the Delta 2000 Performance Compensation Plan, the
DeltaShare Stock Option Plan and the Pilots Stock Option Plan to authorize a
stock option exchange program.
--- --- ---
DELTA'S BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4, 5, 6, 7, 8
AND 9, WHICH WERE SUBMITTED BY SHAREOWNERS.
4. Related to cumulative voting for directors.
--- --- ---
5. Related to executive severance agreements.
--- --- ---
6. Related to the indexing executive stock option grants.
--- --- ---
7. Related to the expensing of stock options.
--- --- ---
8. Related to excluding net pension income from net income in determining
executive incentive compensation.
--- --- ---
9. Related to the independent auditor providing management consulting services.
--- --- ---
Please note: If this Voting Instruction Form is signed, but no direction is
given, Dreyfus Trust Company will vote "FOR" the election of all nominees,
"FOR" Items 2 and 3, and "AGAINST" Items 4, 5, 6, 7, 8 and 9.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)