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-11(c) or 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 2002 Annual Meeting of Shareowners of Delta Air Lines, Inc. The meeting will
be held at the Renaissance Mayflower Hotel, 1127 Connecticut Avenue, N.W.,
Washington, D.C. 20036, on Friday, April 26, 2002 at 10:30 a.m., local time.
The purpose of the meeting is to act on the matters listed in the attached
Notice, and to update you on Delta's activities. There will also be an
opportunity to discuss matters of interest to you as a shareowner.
If you plan to attend the meeting, please mark the appropriate box on your proxy
card, or indicate your intent when prompted by our Internet or telephone voting
system. Please note that you will need to show you are a Delta shareowner to
attend the meeting. If you are a shareowner of record, please bring the enclosed
admission ticket to the meeting. If your shares are held in street name (by a
bank or broker, for example), you may ask the record owner for a proxy or bring
your most recent account statement to the meeting so we can confirm your
ownership of Delta stock. IF YOU DO NOT HAVE AN ADMISSION TICKET OR PROOF THAT
YOU OWN DELTA STOCK, YOU MAY 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.
Delta will once again broadcast the annual meeting live online (listen only) at
www.delta.com/inside/investors/index.jsp for shareowners unable to attend in
person. The replay of the Webcast will be available through May 26, 2002.
We are continuing to offer you the option to receive future annual meeting
materials electronically through the Internet. You may sign up by following the
instructions on your admission ticket. The Internet provides a simple,
convenient way to receive future annual reports and proxy materials, 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. Please sign and return your proxy card in the enclosed
envelope, or use our Internet or telephone voting system, so your shares will be
voted at the meeting.
Cordially,
/s/ Leo F. Mullin
Leo F. Mullin
Chairman of the Board and
Chief Executive Officer
Atlanta, Georgia
March 25, 2002
(DELTA LOGO)
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
PLACE: Renaissance Mayflower Hotel, 1127 Connecticut Avenue, N.W.,
Washington, D.C. 20036
DATE AND TIME: Friday, April 26, 2002, 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, 2002;
3. to consider and vote on the two shareowner proposals
described in the accompanying proxy statement, if those
proposals are presented at the meeting; and
4. 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 an
admission ticket, proof that you own Delta stock, or a proxy from
the 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, 2002, 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 30320. 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 admission ticket;
2. call the toll-free telephone number listed on your admission
ticket; or
3. mark, sign, date and promptly 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, 2002
TABLE OF CONTENTS
PAGE
----
Voting Information.......................................... 1
Corporate Governance Principles............................. 4
Proposal 1--Election of Directors........................... 6
Certain Information About Nominees........................ 7
The Board of Directors and Board Committees............... 8
Compensation of Directors................................. 10
Compensation Committee Interlocks and Insider
Participation.......................................... 11
Beneficial Ownership of Securities.......................... 12
Beneficial Owners of More Than 5% of Voting Stock......... 12
Directors, Nominees for Director and Executive Officers... 12
Personnel & Compensation Committee Report on Executive
Compensation.............................................. 14
Executive Compensation...................................... 19
Summary Compensation Table................................ 19
Option Grants in Last Fiscal Year......................... 21
Aggregated Option Exercises in Last Fiscal Year and FY-End
Option Values.......................................... 21
Long-Term Incentive Plans--Awards in Last Fiscal Year..... 22
Retirement Plans and Other Agreements..................... 22
Stock Performance Graph................................... 26
Audit Committee Report...................................... 27
Proposal 2 -- Ratification of the Appointment of Independent
Auditors.................................................. 28
Fees of Independent Auditors for Year Ended December 31,
2001................................................... 28
Information Regarding Change of Independent Auditors...... 28
Proposals 3 and 4 -- Shareowner Proposals................... 29
General Information......................................... 31
Cost of Solicitation...................................... 31
Submission of Shareowner Proposals........................ 32
Section 16 Beneficial Ownership Reporting Compliance...... 32
Extent of Incorporation by Reference of Materials Included
in or Accompanying This Proxy Statement................ 32
Appendix A -- Audit Committee Charter....................... A-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., to
be voted at Delta's 2002 Annual Meeting of Shareowners. The annual meeting will
be held at the Renaissance Mayflower Hotel, 1127 Connecticut Avenue, N.W.,
Washington, D.C. 20036, on Friday, April 26, 2002, at 10:30 a.m., local time.
These proxies may also be voted at any adjournment of the annual meeting.
Delta's proxy statement, the enclosed proxy card and the Annual Report to
Shareowners are being mailed to shareowners beginning on or about March 25,
2002.
WHEN IS THE RECORD DATE FOR THE MEETING? WHAT CLASSES OF STOCK ARE ELIGIBLE TO
VOTE?
February 28, 2002 is the record date for determining the shareowners entitled to
notice of and to vote at the annual meeting. On that date, there were
outstanding 123,232,371 shares of Delta's common stock and 6,196,800 shares of
Delta's Series B ESOP Convertible Preferred Stock ("ESOP Preferred Stock"). 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.
HOW MANY VOTES ARE NEEDED TO ACT ON PROPOSALS AT THE MEETING?
A majority of the votes entitled to be cast by the holders of all shares of
common stock and ESOP Preferred Stock, voting together as a single class, that
are present or represented at the meeting and entitled to vote will be
necessary:
(1) to elect the director-nominees;
(2) to ratify the appointment of Deloitte & Touche LLP as independent
auditors for the year ending December 31, 2002; and
(3) to approve each of the two shareowner proposals described in this
proxy statement.
A vote "withheld" from a director-nominee has the same effect as a vote against
that director-nominee. An abstention from voting on any other proposal has the
same effect as a vote against that proposal.
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 on page 6 of this proxy statement; (2) "FOR" the
ratification of the appointment of
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Deloitte & Touche LLP as independent auditors for the year ending December 31,
2002; and (3) "AGAINST" each of the two shareowner proposals described on pages
29-31 of 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 you may
submit a proxy before the meeting. To vote by proxy, you may 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 the admission ticket attached to your
proxy card. The Internet and telephone voting procedures are designed to
authenticate votes cast by use of a personal identification number. These
procedures, which comply with Delaware law, 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. Please date all written proxy cards.
HOW ARE PROXIES VOTED?
All properly executed proxies, whether submitted by the Internet, telephone or
mail, will be voted at the annual meeting according to the instructions given in
the proxy card. 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 on page 6 of this proxy statement; (2) "FOR" the
ratification of the appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 2002; and (3) "AGAINST" each of the two
shareowner proposals described on pages 29-31 of this proxy statement.
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 30320-6001; 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.
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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 and to
ratify the selection of independent auditors because those proposals are
"discretionary" items under NYSE rules. 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 necessary for approving
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, 2001, there were
approximately 73,400 participants in the Savings Plan. Fidelity Management Trust
Company is the trustee of the Savings Plan.
The Savings Plan provides that shares of ESOP Preferred Stock and common stock
will be voted as follows:
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) by the trustee in accordance with the participant's confidential
voting instructions; or (2) if no voting instructions are received by the
trustee before the specified deadline, by the trustee in its discretion. Shares
of ESOP Preferred Stock not yet allocated to any participant's account will be
voted by the trustee in proportion to the votes cast on Allocated Shares
pursuant to participants' voting instructions.
DELTA COMMON STOCK FUND. Shares of common stock attributable to a participant's
account in the Delta Common Stock Fund will be voted (1) by the trustee in
accordance with the participant's confidential voting instructions; or (2) if no
voting instructions are received by the trustee before the specified deadline,
by the trustee in its discretion.
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.
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WHAT IF OTHER BUSINESS IS PRESENTED AT THE MEETING?
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.
CORPORATE GOVERNANCE PRINCIPLES
Delta's Board of Directors believes that sound corporate governance practices
provide an important framework to assist the Board in fulfilling its
responsibilities. Accordingly, the Board has formally adopted corporate
governance principles relating to its functions, structure and operations. These
principles, which the Board reviews periodically, are set forth below.
BOARD FUNCTIONS
CHIEF EXECUTIVE OFFICER EVALUATION. The Board will evaluate the performance of
the Chief Executive Officer at least annually. Each outside (non-management)
director will complete an assessment, and the Chief Executive Officer will
complete a self-assessment, of the Chief Executive Officer's performance in
specified categories such as strategic planning, financial matters and
leadership. The outside directors will meet in executive session, with and
without the Chief Executive Officer, to discuss these assessments.
The evaluation will be based on objective criteria which shall include, among
other factors, corporate performance, development of management, and the
accomplishment of annual objectives and long-term strategic goals.
APPROVAL OF MAJOR STRATEGIES AND FINANCIAL OBJECTIVES. Each year the Board will
review and approve Delta's one-year business plan, as well as its long-term
strategic plan, aircraft fleet plan and financial goals. The Board will
regularly monitor Delta's performance with respect to these plans and goals.
BOARD EVALUATION. The Board will annually evaluate the effectiveness of the
Board and its committees. Each director will complete a written assessment of
the Board's performance in specified categories such as fiduciary oversight;
Board governance and process; strategic planning and business decisions; and
financial matters. The Board will meet in executive session to discuss these
assessments. The purpose of this evaluation is to increase the effectiveness of
the Board as a whole, as well as its individual members.
SELECTION OF BOARD MEMBERS. The Board has the responsibility for nominating
directors. In nominating a slate of directors, the Board's objective is to
select individuals with skills and experience which can be of assistance to
management in operating Delta's business. The Board will consider business
experience, diversity, skills, international background and other matters which
are relevant to this objective. Each director should devote the time and
attention necessary to fulfill the obligations of a director.
MANAGEMENT SUCCESSION. The Board will review annually with the Chief Executive
Officer management succession planning and development. There should also be
available, on a continuing basis, the Chief Executive Officer's recommendation
as to his successor should he be unexpectedly disabled.
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EXECUTIVE COMPENSATION. Delta's executive compensation program will be designed
and administered with clear and strong linkages to its business strategy and
long-term goals, particularly the creation of shareowner value, to develop
talented executives and motivate them to work for the long-term advantage of
Delta's primary stakeholder groups.
DIRECTOR COMPENSATION. The Board will periodically review director compensation
in comparison with companies that are similarly situated to ensure that such
compensation is reasonable and competitive.
BOARD INTERACTION WITH INSTITUTIONAL INVESTORS, THE PRESS, CUSTOMERS, ETC. The
Board believes that management speaks for Delta. Individual Board members may,
from time to time, meet or otherwise communicate with various constituencies
that are involved with Delta. However, it is expected that Board members will
speak for Delta only with the knowledge of management and, in most instances, at
the request of management.
BOARD STRUCTURE
NUMBER OF DIRECTORS. The Board will normally consist of between nine and eleven
members, although the Board is willing to increase its size to accommodate the
availability of an outstanding candidate.
INDEPENDENCE. A substantial majority of the directors will be outside directors
who have no significant financial or personal tie to Delta, other than common
stock ownership and entitlement to directors' fees.
BOARD LEADERSHIP. The Board does not have a policy on whether the role of the
Chief Executive Officer and the Chairman should be separate. When the Chief
Executive Officer holds the position of Chairman of the Board, the Board will
consider the election of an outside director to chair the executive sessions of
the Board which are not attended by the Chief Executive Officer and to have such
other duties as the Board deems appropriate.
COMMITTEES OF THE BOARD. The Board, in consultation with the Chief Executive
Officer, will determine the responsibilities and membership of its committees.
Each committee, other than the Executive Committee, will consist solely of
outside directors. The committee chairman, in consultation with committee
members, will determine the frequency and length of the meetings of the
committee.
RETIREMENT/RESIGNATION AND TERM LIMITS. No director may stand for reelection
after age 72. A director is expected to offer to submit his or her resignation
when the director no longer holds the principal occupation he or she held at the
time of election to the Board. Directors who are full-time employees of Delta
shall resign from the Board coincident with their retirement from full-time
employment.
The Board does not believe it should establish term limits for directors. While
term limits could help ensure that there are fresh ideas and viewpoints
available to the Board, term limits have the disadvantage of losing the
contribution of directors who have been able to develop, over a period of time,
increasing insight into Delta and its operations, and who therefore provide an
increasing contribution to the Board.
STOCK OWNERSHIP. Directors are encouraged to own a significant equity interest
in Delta within a reasonable period after initial election to the Board. To more
closely align the interests of directors and Delta's shareowners, a portion of
directors' fees will be paid in the form of common stock.
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BOARD OPERATIONS
NUMBER OF MEETINGS. The Board will meet as frequently as needed for directors
to discharge properly their responsibilities. Regular meetings of the Board are
held four times per year and special meetings are held as required.
CONDUCT OF MEETINGS. Board meetings will be conducted in a manner which ensures
open communication, meaningful participation and timely resolution of issues.
Whenever feasible, directors will receive materials concerning matters to be
acted upon well in advance of the applicable meeting.
EXECUTIVE SESSIONS. The Board will hold executive sessions at least twice a
year without the Chief Executive Officer or any other inside directors.
BOARD ACCESS TO SENIOR MANAGEMENT. Board members have complete access to
Delta's senior management. It is assumed that Board members will use judgment to
be sure that contact with management is not distracting to Delta's business
operations and that the Chief Executive Officer is appropriately informed.
SENIOR MANAGEMENT SERVICE ON OUTSIDE BOARDS. Members of senior management
should review proposed outside Board memberships with the Corporate Governance
Committee, and outside Board memberships ordinarily should be limited to three.
PROPOSAL 1 -- ELECTION OF DIRECTORS
A Board of nine directors is to be elected at the annual meeting. Each director
so 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:
James L. Broadhead, Edward H. Budd, George M.C. Fisher, David R. Goode,
Gerald Grinstein, 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 Ms. Spero, who was elected by the Board of Directors on
January 23, 2002.
Delta's By-Laws require non-employee directors to retire from the Board of
Directors at the annual meeting after they reach age 72. Pursuant to this
provision, Edwin L. Artzt, R. Eugene Cartledge and Mary Johnston Evans will
retire from the Board on April 26, 2002. Mr. Artzt, Mr. Cartledge and Mrs. Evans
served as directors for 11 years, 12 years and 20 years, respectively. Delta
gratefully acknowledges their outstanding service.
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, manufacturing and utilities.
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.
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CERTAIN INFORMATION ABOUT NOMINEES
JAMES L. BROADHEAD was Chairman of the Board of FPL Group, Inc., and its
principal subsidiary, Florida Power & Light Company from 1990 until his
retirement at the end of 2001. He served as Chief Executive Officer of those
companies from 1990 until June 2001. From 1989 to 1990, he was President and
Chief Executive Officer of FPL Group, Inc. From 1986 to 1988, Mr. Broadhead
served as President, Telephone Operating Group of GTE Corporation. He has been a
director of Delta since 1991. Mr. Broadhead is also a director of New York Life
Insurance Company and The Pittston Company. Age 66.
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 68.
GEORGE M.C. FISHER was Chairman of the Board of Eastman Kodak Company from 1993
until his retirement from that Board 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 AT&T Corporation, 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 61.
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 61.
GERALD GRINSTEIN has been non-executive Chairman of the Board of Agilent
Technologies, Inc. since August 1999. He is also 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
PACCAR Inc., The Pittston Company and Vans, Inc. Age 69.
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 59.
7
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 Chairman of Catalyst, and 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 64.
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 57.
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 a director of that company from 1995
to January 1997. He was Chairman of Law Companies International Group, Inc. (a
former subsidiary of Law Companies 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 70.
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors holds regular meetings four times per year and schedules
special meetings when required. The Board also meets informally from time to
time. During 2001, the Board held a total of eight 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 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 to evaluate 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.
8
The Audit Committee members are James L. Broadhead, Chairman, Mary Johnston
Evans, George M.C. Fisher, Joan E. Spero and Andrew J. Young. This committee met
eight times during 2001.
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,
James L. Broadhead, R. Eugene Cartledge, Mary Johnston Evans and John F. Smith,
Jr. This committee met four times during 2001.
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 32 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;
- 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 Mary Johnston Evans, Chairman,
James L. Broadhead, Gerald Grinstein, John F. Smith, Jr. and Andrew J. Young.
This committee met three times during 2001.
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 R. Eugene Cartledge, Chairman,
Edwin L. Artzt, James L. Broadhead, Edward H. Budd and Gerald Grinstein. This
committee met three times during 2001.
EXECUTIVE COMMITTEE
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings.
9
The Executive Committee members are Gerald Grinstein, Chairman, Edwin L. Artzt,
James L. Broadhead, Edward H. Budd, R. Eugene Cartledge, Mary Johnston Evans and
Andrew J. Young. This committee did not meet during 2001.
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 Edwin L. Artzt, Chairman, Edward H. Budd, R.
Eugene Cartledge, David R. Goode and Gerald Grinstein. This committee met four
times during 2001.
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 five
times during 2001.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors (i.e., directors who are not
employed by Delta on a full-time basis) receive an annual retainer of $25,000,
of which $5,000 is paid in shares of common stock, and a meeting fee of $1,000
plus expenses for each Board and Committee meeting attended. In recognition of
the importance of Delta's cost savings initiatives and the sacrifices being made
by Delta employees after the events of September 11, 2001, the Board of
Directors eliminated the $6,250 portion of the annual retainer that would have
been paid in the December 2001 quarter. The chairman of each Committee also
receives an annual retainer of $7,500. Full-time employees of Delta who serve as
directors receive only reimbursement of expenses incurred in attending meetings.
Directors and their spouses receive complimentary transportation privileges on
Delta.
Non-employee directors also receive an annual non-qualified stock option grant
which, at the time of grant, has a Black-Scholes value of $40,000. These awards
are made under the Non-Employee Directors' Stock Option Plan. During 2001 each
non-employee director received a non-qualified stock option to purchase 3,355
shares of common stock at a price of $24.05 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
10
the grant date. In the event of a Change in Control, as defined, stock options
outstanding under the Non-Employee Directors' Stock Option Plan become
immediately vested, exercisable and nonforfeitable for their remaining terms.
Directors may defer all or any part of their cash compensation earned as a
director until a date specified by the director. A participating director may
choose an investment return on the deferred amount from among the investment
return choices available under Delta's Savings Plan, including the Delta Common
Stock Fund which is invested primarily in Delta common stock.
Directors who joined the Board before October 24, 1996, and who retire from the
Board may be elected advisory directors for a term which varies depending upon
the director's term of 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 terminated the Advisory Director Program for all
future directors who were not members of the Board on that date. Non-employee
directors who join the Board after October 24, 1996, will receive, in addition
to their other fees, a deferred payment of $6,300 during each year in which they
serve as a director. The deferred payment will earn 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.
Lifetime advisory directors, and directors who retire from the Board at their
mandatory retirement age, receive, during their lifetime, complimentary
transportation privileges on Delta for themselves and their spouses.
Delta's charitable contribution program permits an eligible director to
recommend up to five tax-exempt organizations to receive donations totaling $1
million after the director's death. Recommended donations will be made by The
Delta Air Lines Foundation, a tax-exempt charitable foundation funded by Delta.
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.
11
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, 2002
PRIMECAP Management Company common stock 15,852,115(1) 12.9%
225 South Lake Ave., Suite 400
Pasadena, CA 91101-3005
FMR Corporation common stock 15,407,058(2) 12.5%
82 Devonshire Street
Boston, MA 02109
Fidelity Management Trust Company ESOP Preferred Stock 6,196,800(3) 100.0%
82 Devonshire Street common stock 10,598,373(3) 8.6%
Boston, MA 02109
(1) Based on Amendment No. 11 to Schedule 13G filed February 14, 2002, in which
PRIMECAP Management Company ("PRIMECAP") reported that, as of December 31,
2001, it had sole voting power over 2,716,315 of such shares, shared voting
power over none of such shares, and sole dispositive power over all
15,852,115 of such shares. PRIMECAP has informed Delta that, at December 31,
2001, 9,990,800 of such shares were held by the Vanguard Primecap Fund,
which is managed by PRIMECAP. In Amendment No. 3 to its Schedule 13G filed
February 7, 2002, the Vanguard Primecap Fund, 100 Vanguard Blvd., Malvern,
PA 19355, reported that it had sole voting power over all 9,990,800 of such
shares, but neither sole nor shared dispositive power over any of such
shares.
(2) Based on Amendment No. 1 to Schedule 13G filed February 14, 2002, in which
FMR Corp. and certain affiliates reported that, as of December 31, 2001, FMR
Corp. and certain affiliates had sole voting power over 910,078 of such
shares, shared voting power over none of such shares and sole dispositive
power over all 15,407,058 of such shares.
(3) These shares are held by Fidelity Management Trust Company as trustee of the
Delta Family-Care Savings Plan.
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, 2002,
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 of Delta as a group. Unless
12
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)
Edwin L. Artzt common stock 5,740(2)
James L. Broadhead common stock 7,046(2)(3)
Edward H. Budd common stock 21,702(2)(3)
R. Eugene Cartledge common stock 8,299(2)(3)
Mary Johnston Evans common stock 8,720(2)(3)
George M.C. Fisher common stock 7,494(4)(5)
David R. Goode common stock 2,967(4)(5)
Gerald Grinstein common stock 7,487(2)(6)
Leo F. Mullin common stock 1,308,875(8)
ESOP Preferred Stock 22
John F. Smith, Jr. common stock 3,016(5)(7)
Joan E. Spero common stock 1,145(5)
Andrew J. Young common stock 6,217(2)
Frederick W. Reid common stock 258,064(8)
ESOP Preferred Stock 58
M. Michele Burns common stock 133,263(8)(9)
ESOP Preferred Stock 43
Vicki B. Escarra common stock 195,557(8)
ESOP Preferred Stock 200
Robert L. Colman common stock 302,565(8)
Directors and Executive Officers as a
Group common stock 2,278,157(8)(9)
(16 Persons) ESOP Preferred Stock 323
(1) The directors and executive officers as a group beneficially owned 1.85% of
the outstanding shares of common stock. Other than Mr. Mullin, who
beneficially owned 1.06% 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 3,038 shares of common stock which the director has the right to
acquire upon the exercise of stock options that were exercisable as of
February 28, 2002, or that will become exercisable within 60 days after that
date.
(3) Includes 1,305 shares, 6,536 shares, 387 shares and 1,110 shares of common
stock attributable to Mr. Broadhead, Mr. Budd, Mr. Cartledge and Mrs. Evans,
respectively, due to their selection of the Delta Common Stock Fund
investment return choice for deferred cash compensation earned as a
director. See page 11 of this proxy statement for additional information
regarding this program.
(4) Includes 1,538 shares of common stock which the director has the right to
acquire upon the exercise of stock options that were exercisable as of
February 28, 2002, or that will become exercisable within 60 days after that
date.
(5) Excludes 529 shares, 361 shares, 414 shares and 204 shares of common stock
attributable to Mr. Fisher, Mr. Goode, Mr. Smith and Ms. Spero,
respectively, 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. 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 11 of this proxy statement for additional information regarding
this program.
(6) 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 160 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.
13
(7) Includes 538 shares of common stock which the director has the right to
acquire upon the exercise of stock options that were exercisable as of
February 28, 2002, or that will become exercisable within 60 days after that
date.
(8) Includes the following number of shares of common stock which the following
persons or group have the right to acquire upon the exercise of stock
options that were exercisable as of February 28, 2002, or that will become
exercisable within 60 days after that date: Mr. Mullin--1,269,900; Mr.
Reid--252,450; Ms. Burns--109,734; Ms. Escarra--177,925; Mr.
Colman--276,475; and directors and executive officers as a group--2,111,364.
(9) Includes 14,773 shares of unvested restricted stock over which Ms. Burns had
voting, but not investment, power as of February 28, 2002.
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, as defined in Delta's
Corporate Governance Principles. This report describes the executive
compensation policies under which the Committee makes decisions about executive
pay and discusses each principal component of the current program. It also
explains the basis on which the Committee made compensation determinations for
2001 for the Chief Executive Officer and the other executive officers named in
the Summary Compensation Table shown elsewhere in this proxy statement.
COMPENSATION STRATEGY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The Committee's foremost objective is to have an executive compensation program
that attracts, retains and motivates 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 clear and strong linkages to Delta's
business strategy and long-term goals, particularly the creation of shareowner
value, will accomplish this objective.
Consistent with this philosophy, the Committee has structured the executive
compensation program to achieve the following:
- Enable Delta to attract and retain a group of highly qualified and
experienced executives by providing a competitive total compensation
package;
- Focus Delta's executives on achieving aggressive financial and operating
goals tied to the company's near- and long-term business objectives;
- Emphasize at risk pay by having a substantial portion of total pay
consist of incentive pay components that tie executives' rewards to
performance results achieved; and
- Closely link the long-term interests of Delta's executives to those of
its shareowners by having stock-based compensation comprise a major
portion of total pay opportunities. To further support this goal, the
Committee encourages stock ownership by Delta executives.
These principles apply to compensation determinations for all executive
officers. In making decisions about actual compensation levels, the Committee
considers all elements of the executive compensation program in total, and not
any one element in isolation. The Committee works with an independent
compensation consulting firm to assist it in evaluating and, as appropriate,
revising the executive compensation program to better support Delta's business
strategy and long-term goals.
The Committee believes it is important to consider pay levels and practices of
the companies with which Delta competes for executives to ensure that salary
levels and incentive opportunities
14
are competitive and support the objectives listed above. Accordingly, the
Committee regularly compares Delta's total pay opportunities and executive
compensation components to the programs in place at other major U.S. airlines
and at a cross-section of well-regarded companies in general industry. These
comparisons reflect the fact that Delta's competitors for executive talent
extend beyond Delta's direct business competitors. 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.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
The primary components of Delta's executive compensation package are base
salary, incentive compensation and stock-based awards.
BASE SALARY
The Committee approves salaries for executives above the level of Senior Vice
President, and recommends the Chief Executive Officer's salary to the Board for
its approval. The Committee's objective is to set base salaries for Delta's
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 median (50th
percentile) of the comparative marketplace.
Actual salary levels are based on a combination of factors that includes the
executive's performance, responsibilities and experience, as well as the
salaries of comparably-placed executives in the competitive market. The
Committee exercises its discretion in making salary recommendations and
decisions, and does not apply a specific formula or weighting to the factors
listed above. In this connection, the Committee relies to a large extent on the
Chief Executive Officer's evaluations of individual executive officer
performance, after reviewing such individual performance with him. Salary
increases for executives do not follow a preset schedule.
During 2001, Delta strengthened its management team by electing Mr. Reid as
President and Chief Operating Officer, by promoting Ms. Escarra to Chief
Marketing Officer and by assigning Ms. Burns additional responsibilities as
Chief Financial Officer. The Committee increased the salary rates of these
executive officers to recognize their expanded duties and responsibilities. The
size of these increases was determined based on the factors mentioned above. The
Committee believes the salary rates for Delta's executive officers are generally
in line with salaries for comparable positions at the major U.S. airlines and
the broader comparator group discussed above.
INCENTIVE COMPENSATION
The purpose of the incentive compensation program is to provide additional cash
compensation for achieving annual levels of financial and operating performance
that support Delta's near- and long-term strategic objectives. The program
emphasizes the link between pay and performance for Delta's executives by
providing rewards that can only be earned by meeting pre-established performance
goals. Delta's target for total annual cash compensation (salary plus incentive
compensation) is at the 55th percentile of the market.
In January 2001, the Committee approved a compensation formula to determine the
annual incentive awards for executive officers and other participants in the
program. Awards are based on Delta's achieving specific financial goals (net
income and return on investment), as well as effectiveness and efficiency goals
(safety, reliability, customer satisfaction, passenger revenue per
15
available seat mile and non-fuel cost per available seat mile). The financial
and effectiveness and efficiency goals were established in light of Delta's
performance in 2000, its business plan for 2001 and the performance of Delta's
peer airlines. The awards are also based on key initiative goals related to
Delta's strategic objectives (for example, the implementation of strategies
related to customer service, airport master plans, technology and human
resources, including diversity and labor relations). The Chief Executive Officer
is measured on overall corporate financial and operational results. All other
participants are rewarded based on an incentive pool that is generated based on
overall corporate results, but that is allocated among participants based on
individual performance.
During 2001, Delta met or exceeded some of its goals, but did not achieve its
financial targets due to the terrorist attacks on the United States on September
11, 2001, the slowing U.S. and world economies and pilot labor issues at Delta
and Comair. Particularly because of the serious financial challenges confronting
Delta and the airline industry as a result of the events of September 11, and in
recognition of the sacrifices being borne by Delta's workforce during this
period, management recommended that no incentive awards be paid for 2001, even
though some payout would have resulted under the applicable formula. The
Committee accepted this recommendation. Nevertheless, the Committee believes
management and the entire Delta team responded exceedingly well to the many
challenges Delta faced during the year, including the unprecedented events of
September 11. These efforts are discussed in the 2001 Annual Report to
Shareowners which accompanies this proxy statement.
STOCK-BASED AWARDS
The potential value of long-term incentive opportunities comprises the largest
portion (60% 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 all of Delta's stakeholders. To reflect this emphasis on
equity-based compensation, long-term incentive awards for Delta's executives are
targeted at the 60th percentile of the market. Specific award guidelines vary by
level of responsibility. Stock-based compensation awards are made under a plan
that provides that employees selected by the Committee can receive awards of
stock options, restricted stock and other stock-based awards; award types can
vary from year to year at the Committee's discretion.
In January 2001, the Committee granted non-qualified stock options and target
awards of performance-based stock units to officers, and granted non-qualified
stock options to selected other employees. The long-term incentive award
opportunity for officers is delivered 70% in stock options and 30% in
performance-based stock units. Awards for non-officer participants are delivered
solely in the form of stock options. The January 2001 awards had an economic
value equal to 50% of the normal annual awards because (1) the Committee made
full year awards to officers and selected employees in July 2000 in accordance
with its then current practice; and (2) effective December 31, 2000, Delta
changed its year end from June 30 to December 31.
Stock options granted in January 2001 gave executive officers and other
participants the right to purchase shares of Delta common stock at its closing
price on the New York Stock Exchange on the date of grant, and have a term of
ten years. To enhance the retention element of these awards, the options become
exercisable in 25% increments on each of the first four anniversaries of the
grant date. No stock options granted under the plan have been repriced.
16
The portion of the long-term award allocated to stock options is converted to a
number of stock options by using the Black-Scholes option pricing model. The
Committee may apply its judgment to adjust the formula award based on individual
performance, contribution to Delta's success and equity relative to other plan
participants. The Committee may also consider other factors from time to time in
making stock option awards.
The performance-based stock unit program provides rewards based on Delta's
financial and operational performance relative to peer domestic airlines over
three-year performance cycles. As with stock options, formula awards may be
adjusted based on the factors listed above. At the end of each three-year
performance cycle, participants may earn nothing, or a number of shares ranging
from 40% to a maximum of 200% of the target award. The performance goals
measured are Delta's ranking relative to its peer domestic airlines with respect
to total shareowner return and three key U.S. Department of Transportation
measures related to operations and customer satisfaction.
In July 2001, the Committee granted additional awards of stock options and
performance-based stock units to Mr. Reid, Ms. Escarra and Ms. Burns to
recognize their expanded duties and responsibilities. The terms of these awards
are similar to the stock-based awards granted by the Committee in January 2001.
In August 2001, the Committee approved the payout of awards earned from
previously granted target awards of performance-based stock units for the
three-year performance cycle that began on July 1, 1998 and ended on June 30,
2001. 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 the
specified performance measures.
STOCK OWNERSHIP
In keeping with the principles outlined earlier in this report, the Committee
advocates stock ownership by Delta's executives. The Committee believes that the
interests of executives and Delta's shareowners will be more closely aligned if
executives own meaningful amounts of Delta stock. Accordingly, the Committee
considers the appropriate mix of stock and cash when designing and implementing
the executive compensation program.
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 certain "non-performance
based" compensation paid to the chief executive officer or any of the four other
highest paid officers of a publicly-held corporation. 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 both the incentive
compensation and stock-based award programs have been approved by Delta's
shareowners. The Committee reserves the right, however, to 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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Mullin's compensation is determined following a process similar to that used
for other executive officers. The terms of Mr. Mullin's employment agreement are
described elsewhere in this proxy statement.
17
During 2001, Mr. Mullin's annual base salary continued to be $795,000. To
emphasize the need for cost savings at Delta after the events of September 11,
2001, and in support of the sacrifices being made by all Delta employees during
the period, Mr. Mullin elected to forego his salary from October 1, 2001 through
December 31, 2001. For the same reasons, he also recommended to the Committee
that he receive no incentive compensation for 2001. The Committee accepted this
recommendation.
In January 2001, the Committee awarded Mr. Mullin non-qualified stock options
covering 200,000 shares of Delta common stock and a target award of 65,000
shares of performance-based stock units under the same programs 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, as well as Mr.
Mullin's performance and his contributions to Delta's overall results. The
Committee's emphasis on performance in setting Mr. Mullin's incentive
compensation and stock-based awards resulted in approximately 90% of his total
compensation opportunity for 2001 being based on performance.
In August 2001, 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
1998. Based on Delta's performance from July 1, 1998 through June 30, 2001, Mr.
Mullin received 39,300 shares of Delta common stock.
OTHER MATTERS
During 2001, the Board of Directors continued the formal process by which this
Committee conducts an annual and independent evaluation of the Chief Executive
Officer's performance that involves written feedback form all directors. The
Committee reviewed the results of this evaluation with the Board in January
2002.
Respectfully submitted,
THE PERSONNEL & COMPENSATION COMMITTEE
Edward H. Budd, Chairman
George M.C. Fisher
David R. Goode
Gerald Grinstein
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation paid
to Delta's Chief Executive Officer and its four other most highly compensated
executive officers at December 31, 2001.
Mr. Mullin's salary was set at $795,000 per year effective August 1, 2000. To
emphasize the need for cost savings at Delta after the events of September 11,
2001, and in recognition of the sacrifices being made by all Delta employees
during the period, Mr. Mullin elected to forego his salary from October 1, 2001
through December 31, 2001. Accordingly, Mr. Mullin's salary for 2001 was reduced
by $198,750.
Management recommended that no bonuses be paid for 2001 particularly because of
the serious financial challenges confronting Delta and the airline industry as a
result of the events of September 11, and in recognition of the sacrifices being
borne by Delta's workforce during this period. As discussed in its Report on
Executive Compensation on pages 14 through 18 of this proxy statement, the
Personnel & Compensation Committee accepted this recommendation even though the
Committee believes management and the entire Delta team responded exceedingly
well to the many challenges Delta faced during the year. Accordingly, the
executive officers did not receive any bonuses in 2001.
The LTIP payouts disclosed in the table represent the awards earned from
previously granted target awards of performance-based stock units for the
three-year performance cycle that began on July 1, 1998 and ended on June 30,
2001. These payouts were based on Delta's ranking relative to its peer domestic
airlines with respect to specified performance measures. The payouts were made
in shares of Delta common stock. The amounts shown in this column equal the
number of shares received valued at $40.08 per share (the average of the opening
and closing prices of the common stock on the New York Stock Exchange on August
24, 2001, the date the payout was approved by the Personnel & Compensation
Committee). On March 15, 2002, the
19
average of the opening and closing prices of the common stock on the New York
Stock Exchange was $35.61.
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER RESTRICTED SECURITIES PAYOUTS
ANNUAL STOCK UNDERLYING LTIP
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR(1) ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)
Leo F. Mullin Year ended 12/31/01 596,250 0 7,817 0 200,000 1,575,144
Chairman of the Board 6 months ended 12/31/00 393,750 450,000 7,418 0 225,000 0
and Chief Executive Year ended 6/30/00 745,833 1,400,000 66,629 0 650,000 0
Officer Year ended 6/30/99 695,833 1,000,000 46,237 0 118,200 0
Frederick W. Reid Year ended 12/31/01 655,000 0 62,310 0 113,200 607,212
President and Chief 6 months ended 12/31/00 280,417 217,500 5,317 0 47,400 0
Operating Officer Year ended 6/30/00 536,667 570,000 117,848 0 34,600 0
Year ended 6/30/99 500,000 425,000 132,158 0 125,000 0
M. Michele Burns Year ended 12/31/01 530,000 0 5,187 0 74,000 192,384
Executive Vice President 6 months ended 12/31/00 249,375 196,400 4,485 0 27,200 0
and Chief Financial
Officer(7)
Vicki B. Escarra Year ended 12/31/01 511,667 0 4,961 0 70,400 529,056
Executive Vice 6 months ended 12/31/00 222,917 175,200 4,057 0 41,300 0
President and Chief Year ended 6/30/00 394,583 420,000 4,039 0 30,100 0
Marketing Officer Year ended 6/30/99 335,000 285,000 2,664 0 233,000 0
Robert L. Colman Year ended 12/31/01 440,000 0 4,326 35,400 486,972
Executive Vice 6 months ended 12/31/00 215,000 169,400 4,121 0 40,700 0
President-- Year ended 6/30/00 415,000 430,000 4,248 0 30,100 0
Human Resources Year ended 6/30/99 298,718 970,759 68,061 1,935,000 300,000 0
ALL OTHER
COMPEN-
SATION
NAME AND PRINCIPAL POSITION ($)(6)
Leo F. Mullin 10,858
Chairman of the Board 8,348
and Chief Executive 8,592
Officer 154,448
Frederick W. Reid 72,115
President and Chief 9,384
Operating Officer 70,629
207,275
M. Michele Burns 7,776
Executive Vice President 7,524
and Chief Financial
Officer(7)
Vicki B. Escarra 7,512
Executive Vice 7,965
President and Chief 7,746
Marketing Officer 6,199
Robert L. Colman 5,068
Executive Vice 4,638
President-- 4,781
Human Resources 158,947
(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. Mr. Colman's amount for the year ended June 30,
1999 includes a signing bonus of $718,885.
(3) Amounts for 2001 represent reimbursements for taxes related to Delta's
payment of life insurance premiums.
(4) At December 31, 2001, Ms. Burns held 15,651 shares of restricted stock
valued at $457,948 based on the $29.26 closing price of the common stock on
the New York Stock Exchange on December 31, 2001.
(5) Represents the number of shares of common stock subject to stock options.
(6) During 2001, Delta paid supplemental group life insurance premiums and made
contributions under the Savings Plan as follows: Mr. Mullin--$9,158 and
$1,700, respectively; Mr. Reid--$7,415 and $1,700, respectively; Ms.
Burns--$6,076 and $1,700, respectively; Ms. Escarra--$5,812 and $1,700,
respectively; and Mr. Colman--$5,068 and $0, respectively. Pursuant to his
employment agreement, the amount for Mr. Reid also includes Delta's payment
of $63,000 for an individual life insurance premium.
(7) Ms. Burns became an executive officer of Delta during the six-month
transition period ended December 31, 2000. Accordingly, information
regarding her compensation for prior periods is not included.
20
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding non-qualified stock
options granted during 2001 to the persons named in the Summary Compensation
Table. None of these grants included stock appreciation rights.
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------- -----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANT DATE GRANTED (#) FISCAL YEAR ($/SH)(1) DATE VALUE($)(2)
---- ---------- ----------- --------------- ----------- ---------- -----------
Leo F. Mullin 1/25/2001 200,000 8.48 45.9375 1/24/2011 4,023,500
Frederick W. Reid 1/25/2001 43,200 1.83 45.9375 1/24/2011 869,076
7/25/2001 70,000 2.97 44.5000 7/24/2011 1,297,275
M. Michele Burns 1/25/2001 39,000 1.65 45.9375 1/24/2011 784,583
7/25/2001 35,000 1.48 44.5000 7/24/2011 648,638
Vicki B. Escarra 1/25/2001 35,400 1.50 45.9375 1/24/2011 712,160
7/25/2001 35,000 1.48 44.5000 7/24/2011 648,638
Robert L. Colman 1/25/2001 35,400 1.50 45.9375 1/24/2011 712,160
(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 become exercisable with respect to 25% of the covered shares on each
of the first four anniversaries of the grant date.
(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
1/25/2001 BECOME EXPECTED INTEREST VOLATILITY DIVIDEND
EXERCISABLE OPTION TERM RATE(%)(A) RATE(%)(B) YIELD(%)(C)
-------------------- ----------- ---------- ---------- -----------
1/25/2002 6 years 6.18 27.00 0.22
1/25/2003 7 years 5.13 26.99 0.22
1/25/2004 8 years 6.14 26.93 0.22
1/25/2005 9 years 6.09 26.46 0.22
DATE OPTIONS GRANTED
7/25/2001 BECOME EXPECTED INTEREST VOLATILITY DIVIDEND
EXERCISABLE OPTION TERM RATE(%)(A) RATE(%)(B) YIELD(%)(C)
7/25/2002 6 years 4.91 27.37 0.22
7/25/2003 7 years 5.06 27.24 0.22
7/25/2004 8 years 5.12 26.78 0.22
7/25/2005 9 years 5.18 26.95 0.22
(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 $0.10 per share
annualized dividend divided by the fair market value of the common stock
on the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The following table sets forth certain information regarding the number and
value of unexercised in-the-money stock options held at December 31, 2001 by the
persons named in the Summary
21
Compensation Table. None of the persons named in the Summary Compensation Table
exercised any stock options during 2001, nor do any of those persons hold any
stock appreciation rights.
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT FY-END($)(1)
ACQUIRED ON VALUE OPTIONS AT FY-END(#)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Leo F. Mullin 0 0 1,219,900 973,300 0 0
Frederick W. Reid 0 0 241,650 328,550 0 0
M. Michele Burns 0 0 83,317 137,583 0 0
Vicki B. Escarra 0 0 169,075 222,725 0 0
Robert L. Colman 0 0 267,625 138,575 0 0
(1) Value of unexercised in-the-money stock options at December 31, 2001, is
based on the $29.26 closing price of the common stock on the New York Stock
Exchange on December 31, 2001.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table sets forth certain information regarding target awards of
performance-based stock units granted during 2001 to the persons named in the
Summary Compensation Table.
NUMBER OF SHARES, PERFORMANCE OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
NAME RIGHTS(#) MATURATION OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
Leo F. Mullin 65,000 01/01/01-12/31/03 26,000 65,000 130,000
Frederick W. Reid 10,600 01/01/01-12/31/03 4,240 10,600 21,200
18,000 07/01/01-06/30/04 7,200 18,000 36,000
M. Michele Burns 9,600 01/01/01-12/31/03 3,840 9,600 19,200
9,000 07/01/01-06/30/04 3,600 9,000 18,000
Vicki B. Escarra 8,700 01/01/01-12/31/03 3,480 8,700 17,400
9,000 07/01/01-06/30/04 3,600 9,000 18,000
Robert L. Colman 8,700 01/01/01-12/31/03 3,480 8,700 17,400
RETIREMENT PLANS AND OTHER AGREEMENTS
PENSION PLAN TABLE
The following table shows the estimated annual pension payable to a non-pilot
employee (before reduction for Social Security benefits and not accounting for
the limitations discussed below), 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, 2001 at the normal retirement age of 65
after
22
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
Final average earnings, for purposes of the Pension Plan, 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, 2002, for the persons named in the Summary
Compensation Table are as follows: Mr. Mullin--26 years, 6 months*; Mr. Reid--16
years, 4 months**; Ms. Burns--14 years, 2 months***; Ms. Escarra--28 years, 5
months; and Mr. Colman--21 years, 4 months.*
Employees designated by the Personnel & Compensation Committee, including the
persons named in the Summary Compensation Table, are eligible to participate in
supplemental, non-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.
The Delta Family-Care Disability and Survivorship Plan ("Survivorship 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
Survivorship Plan also provides a lump sum death benefit of up to $50,000. In
general, final average earnings, for purposes of the Survivorship Plan, 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
------------------------------
* 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. Mr. Colman's benefit under Delta's non-qualified defined benefit
plan will be reduced by the amount of any retirement benefits he receives
under the defined benefit plans of his former employer.
** 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.
*** 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.
23
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
Survivorship 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.
RETENTION PROTECTION AGREEMENTS
Delta has entered into Retention Protection Agreements ("Retention Agreements")
with all of the persons named in the Summary Compensation Table and certain
other management personnel. 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, 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 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 either two or 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 target award of performance-based stock units 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
Mr. Mullin's employment agreement with Delta provides for Mr. Mullin's
employment through the later of August 13, 2002, or the first anniversary of the
date written notice of intent to terminate is provided by Delta. The employment
agreement also provides for Mr. Mullin to participate in Delta's employee
benefit programs, including insurance, retirement and fringe benefits, on terms
no less favorable than the terms offered to other senior executives of Delta.
24
Special provisions apply upon Mr. Mullin's retirement prior to age 62 or death
prior to commencement of benefits.
In the event of the termination of Mr. Mullin's employment during the 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 two times the sum of
his final annual salary and the greater of his most recent target or actual
annual incentive award; to a prorated target incentive award; and to
continuation of medical and other benefits for two years after termination. In
addition, upon termination under these circumstances, Mr. Mullin will be
credited with two additional years of service for purposes of Delta's defined
benefit retirement plans. 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 the event of a Change in Control of
Delta, as defined in the Retention Agreements, the employment agreement provides
that Mr. Mullin will be entitled to all of the benefits afforded to senior
executives under the Retention Agreements. In addition, in the event of a Change
in Control, the definition of Good Reason applicable to Mr. Mullin will include
Mr. Mullin's resignation from Delta during the sixty-day period commencing on
the first anniversary of the Change in Control.
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 $185,000, had termination occurred between October 2, 1998
and September 30, 1999, to $81,000 if termination occurs between October 1, 2009
and September 30, 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.
PERFORMANCE-BASED STOCK UNIT PROGRAM
The performance-based stock unit program provides rewards based on Delta's
financial and operational performance relative to peer domestic airlines over
three-year performance cycles. At the end of each three-year performance cycle,
participants may earn nothing, or a number of shares ranging from 40% to a
maximum of 200% of the target award. Performance goals measured are Delta's
ranking relative to its peer domestic airlines with respect to total shareowner
return (share price appreciation plus reinvested dividends) and three key U.S.
Department of Transportation measures related to operations and customer
satisfaction (on-time arrival performance, mishandled baggage rate and consumer
complaint record).
During 2001, the program was expanded to include as participants for each
existing three-year performance cycle persons who became eligible to participate
in the program after the start, but before the end, of that performance cycle.
Previously, participation for each three-year
25
performance cycle had been limited to persons who were eligible to participate
in the program at the beginning of that cycle. All awards to participants
resulting from the expansion of the program, including one award to each of Mr.
Reid, Ms. Burns and Mr. Colman, are prorated to reflect the portion of the
applicable three-year performance cycle during which the participant was
eligible to participate in the program. The Personnel & Compensation Committee
generally intends to permit future officers to participate in the program on a
similar basis when they become officers.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total returns 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.
CUMULATIVE TOTAL RETURNS(1)
(PERFORMANCE GRAPH)
12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001
Delta $100.00 $168.26 $147.32 $141.38 $142.73 $ 83.46
S&P 500 $100.00 $131.01 $165.95 $198.35 $178.24 $166.24
Major U.S. Airlines(2) $100.00 $157.46 $131.38 $137.11 $162.64 $101.20
------------------------------
(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 2001. 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.
26
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. A copy of the Charter, which was last amended by the Board of
Directors on October 25, 2001, is attached to this Proxy Statement as Appendix
A.
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 are responsible for
expressing an opinion on the conformity of Delta's audited financial statements
to accounting principles generally accepted in the United States.
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 amended. In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), 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, 2001, 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 evaluated
firms that provided proposals to serve as Delta's independent auditors for 2002
and recommended that the Board of Directors appoint Deloitte & Touche LLP. The
Board of Directors agreed with this recommendation and, accordingly, appointed
Deloitte & Touche LLP as Delta's independent auditors for 2002, subject to
shareowner ratification.
Respectfully submitted,
THE AUDIT COMMITTEE
James L. Broadhead, Chairman
Mary Johnston Evans
George M.C. Fisher
Joan E. Spero
Andrew J. Young
27
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 2002,
subject to ratification by the shareowners. Arthur Andersen LLP served as
Delta's independent auditors for 2001. Representatives of Deloitte & Touche LLP
and Arthur Andersen 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. 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 and regularly attends Audit Committee meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
FEES OF INDEPENDENT AUDITORS FOR YEAR ENDED DECEMBER 31, 2001
The following table shows the aggregate fees billed to Delta by its independent
auditors, Arthur Andersen LLP, for services rendered during the year ended
December 31, 2001.
DESCRIPTION OF FEES AMOUNT($)
Audit Fees(1) 1,052,000
Financial Information Systems Design and Implementation Fees 0
All Other Fees 5,265,250
(1) Includes fees for audits of December 31, 2001 financial statements and
reviews of the related quarterly financial statements.
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 is subject to ratification by Delta's
shareowners at the annual meeting.
Andersen's reports on Delta's consolidated financial statements for the past two
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.
Andersen's report on Delta's consolidated financial statements for 2001 does not
contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles.
During Delta's two most recent fiscal years and through March 8, 2002 (the date
Delta filed a Current Report on Form 8-K disclosing its decision to no longer
engage Andersen), 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.
During Delta's two most recent fiscal years and through March 8, 2002, Delta did
not consult Deloitte & Touche LLP with respect to the application of accounting
principles to a specified
28
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.
PROPOSALS 3 AND 4 -- SHAREOWNER PROPOSALS
The following two 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.
PROPOSAL 3
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who is the beneficial owner of 100 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 Airlines, 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 22,124,102 shares, representing approximately 20% 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 SHAREOWNER PROPOSAL FOR
THE FOLLOWING REASONS:
A similar proposal has been rejected at past annual meetings four times by you,
our shareowners. The important reasons for rejecting the proposal in the past
remain important reasons for rejecting this proposal now. Cumulative voting may:
- allow special interest groups to elect a director;
- result in directors being elected who feel an obligation to represent the
special interest groups that elected them, regardless of whether the
furtherance of those groups' interests would benefit all of Delta's
shareowners generally; and
- create factionalism among Board members and undermine their ability to
work together effectively.
In order to minimize the risks of such divisiveness, Delta, like most other
major corporations, does not utilize cumulative voting for the election of
directors. (Delta recently surveyed the top 100 of the Fortune 500 companies,
finding that only seven of these companies provide for cumulative voting.) The
voting system used by Delta and many other companies:
- ensures that each director is elected by shareowners representing a
majority of all of the shares voted at the meeting;
29
- encourages accountability of each director to all Delta's shareowners;
and
- reduces the risk of divisive factionalism.
In sum, the Board of Directors believes that Delta's current system of electing
directors best serves the interests of all Delta's shareowners.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
PROPOSAL 4
Captain Michael H. Messmore, Air Line Pilots Association, 100 Hartsfield Centre
Parkway, Suite 200, Atlanta, Georgia 30354, who is the beneficial owner of 1,500
shares of common stock and 150 shares of ESOP Preferred Stock, has given notice
that he intends to introduce the following resolution at the annual meeting:
"RESOLVED, that the stockholders of Delta Air Lines, Inc. (the "Company") urge
the Board of Directors to seek shareholder approval for future severance with
senior executives (specifically, the Chief Executive Officer, President, Chief
Operating Officer, and all Executive Vice Presidents of the Company) that
provide benefits in an amount exceeding two times the sum of the executive's
annual salary and 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 (including reimbursable expenses) to be paid to the executive."
PROPONENT'S SUPPORTING STATEMENT
"Upon the resignation of former CEO Ronald Allen in 1997, the Company agreed to
pay a lump sum severance amount of $4,501,000, $85,515 in lieu of medical and
dental benefits, a total annual retirement payment of $765,000 per year, an
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. The Company has also paid
$408,776 to design, build and furnish office space for Mr. Allen.
The Company's agreements with current CEO Leo Mullin and certain other senior
executives provide generous severance benefits, especially if employment is
terminated in connection with a change in control. We recognize that severance
agreements such as those the Company has entered into with Mr. Allen and others
may be appropriate in some circumstances. However, given the magnitude of the
benefits payable under such agreements and the effect of those obligations in
the event of a change in control of the Company, we believe the Company should
seek shareholder approval of any future such agreements. We believe that
requiring shareholder approval of such agreements may also have the beneficial
effect of insulating the Board of Directors from manipulation in the event a
senior executive's employment must be terminated by the Company.
30
Because it is not always practical to obtain prior shareholder approval, the
Company 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. Also, the Council of Institutional Investors
favors shareholder approval if the amount payable exceeds 200% of the
executive's annual base salary.
For these reasons we urge shareholders to vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREOWNER PROPOSAL FOR
THE FOLLOWING REASONS:
Delta's executive compensation program is designed to attract and retain
highly-qualified executives, and to motivate those executives to achieve Delta's
overall business and financial goals. This is critical in today's highly
competitive labor market, particularly in light of the unprecedented challenges
currently facing the airline industry.
To compete for the best executive talent, many companies provide key executives
with significant incentives. Delta believes it must respond to this competitive
practice by providing incentives to executives to leave companies where they are
highly valued and compensated, and by offering its executives competitive
employment packages to reduce the risk of losing them to other companies.
Severance provisions may be included in these packages based on the competitive
market and the unique circumstances of each employment situation. To arbitrarily
limit what Delta may offer as a severance payment, or to require shareowner
approval of the terms of a severance provision, would significantly limit
Delta's ability to attract new executives by making it difficult for Delta to
provide a new executive with a competitive employment package in a timely
manner. Moreover, a shareowner approval requirement would also negatively impact
Delta's recruitment of key executives by requiring the premature public
disclosure of confidential employment negotiations. Similarly, requiring
subsequent shareowner ratification would hamper Delta's ability to recruit key
executives because those executives would be unwilling to accept a Delta
position if their employment agreements are not binding upon acceptance of the
position.
In sum, an obligation to limit the value or to obtain shareowner approval of a
severance provision would severely inhibit Delta's ability to recruit and retain
talented executives by impeding Delta's ability to develop and negotiate
agreements that address the competitive market, Delta's needs, and the
individual nature of these situations.
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 mail, in person or by
telephone, 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 also solicit proxies.
31
SUBMISSION OF SHAREOWNER PROPOSALS
A shareowner may submit a proposal to be considered for inclusion in our proxy
statement for the 2003 annual meeting, provided that the shareowner complies
with Securities and Exchange Commission rules and we receive the proposal no
later than 5:00 p.m., local time, on November 26, 2002, at the following
address:
Robert S. Harkey, Secretary
Delta Air Lines, Inc.
Dept. No. 981
Post Office Box 20574
Atlanta, Georgia 30320-6001
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
director if the shareowner complies with the requirements specified in Delta's
By-Laws. The requirements include:
(1) providing written notice to Delta's Secretary at the above address that
is received at least 90 days, but not more than 120 days, before the
anniversary date of the immediately preceding annual meeting (subject
to adjustment if the subsequent year's meeting date is substantially
moved, as provided in the By-Laws); and
(2) supplying the additional information listed in Section 3.1, and for
nominations Section 4.2, of Delta's By-Laws.
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 to file certain reports concerning
their beneficial ownership of Delta's equity securities. Delta believes that
during 2001 all reporting persons complied with their Section 16(a) filing
obligations.
EXTENT OF INCORPORATION BY REFERENCE OF MATERIALS INCLUDED IN
OR ACCOMPANYING THIS PROXY STATEMENT
The Audit Committee and Personnel & Compensation Committee Reports 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, 2001. 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.
32
APPENDIX A
DELTA AIR LINES, INC.
AUDIT COMMITTEE CHARTER
(The Board of Directors initially adopted this Charter on April 27, 2000
and last amended it on October 25, 2001)
I. Composition of the Audit Committee: The Audit Committee shall consist of
at least three directors appointed by the Board of Directors. The
composition of the Audit Committee shall comply with the independence and
other applicable membership requirements of the New York Stock Exchange,
Inc.
II. Purposes of the Audit Committee: The purposes of the Audit Committee are
to assist the Board of Directors:
1. in its oversight of the Company's accounting and financial reporting
principles and policies and internal controls and procedures;
2. in its oversight of the Company's financial statements and the
independent audit thereof;
3. in selecting, evaluating and, where deemed appropriate, replacing the
independent auditors; and
4. in evaluating the independence of the independent auditors.
The function of the Audit Committee is oversight. The members of the Audit
Committee are not full-time employees of the Company and are not, and do
not represent themselves to be, accountants or auditors, or experts in the
fields of accounting or auditing. It is not the duty or responsibility of
the Audit Committee or its members to conduct "field work" or other types
of auditing or accounting reviews or procedures. Each member of the Audit
Committee shall be entitled to rely on (i) the integrity of those persons
and organizations within and outside the Company that provide information
to the Audit Committee and (ii) the accuracy of the financial and other
information provided to the Audit Committee by such persons or
organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Board of Directors).
The management of the Company is responsible for the preparation,
presentation and integrity of the Company's financial statements.
Management is responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The internal audit department is
responsible for evaluating the Company's internal controls. The independent
auditors are responsible for planning and carrying out a proper audit of
the Company's annual financial statements, reviews of the Company's
quarterly financial statements prior to the filing of each quarterly report
on Form 10-Q, and other procedures.
The independent auditors for the Company are ultimately accountable to the
Board of Directors and the Audit Committee. The Board of Directors, with
the assistance of the Audit Committee, has the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent auditors.
The independent auditors shall submit to the Audit Committee annually a
formal written statement delineating all relationships between the
independent auditors and the Company ("Statement as to Independence"),
addressing at least the matters set forth in Independence Standards Board
No. 1.
The independent auditors shall submit to the Company annually a formal
written statement of the fees billed, or expected to be billed, for each of
the following categories of services rendered by the independent auditors:
(i) the audit of the Company's annual financial statements for the most
recently completed fiscal year and the reviews of the financial statements
included in the Company's Quarterly Reports of Form 10-Q for that fiscal
year; (ii) information technology consulting services for the most recently
completed fiscal year,
A-1
in the aggregate and by each service (and separately identifying fees for
such services relating to financial information systems design and
implementation); and (iii) all other services rendered by the independent
auditors for the most recently completed fiscal year, in the aggregate and
by each service.
III. Meetings of the Audit Committee: The Audit Committee shall meet at such
times as it deems appropriate, but not less than four times annually. The
Audit Committee should meet separately at least annually with management,
the director of the internal audit department and the independent auditors
to discuss any matters that the Audit Committee or any of these persons or
firms believe should be discussed privately. The Audit Committee may
request any officer or employee of the Company or the Company's outside
counsel or independent auditors to attend a meeting of the Audit Committee
or to meet with any members of, or consultants to, the Audit Committee.
Members of the Audit Committee may participate in a meeting of the Audit
Committee by conference call or similar communications equipment by which
all persons participating in the meeting can hear each other.
IV. Duties and Powers of the Audit Committee: To carry out its purposes, the
Audit Committee shall have the following duties and powers:
1. with respect to the independent auditor,
(i) to provide advice to the Board of Directors in selecting,
evaluating or replacing independent auditors;
(ii) to review the fees charged by the independent auditors for audit
and non-audit services;
(iii) to ensure that the independent auditors prepare and deliver
annually a Statement as to Independence (it being understood that
the independent auditors are responsible for the accuracy and
completeness of this Statement), to discuss with the independent
auditors any relationships or services disclosed in this Statement
that may impact the objectivity and independence of the Company's
independent auditors and to recommend that the Board of Directors
take appropriate action in response to this Statement to satisfy
itself of the independent auditors' independence; and
(iv) to instruct the independent auditors that the independent auditors
are ultimately accountable to the Board of Directors and Audit
Committee;
2. with respect to the internal audit department,
(i) to review the performance of the internal audit department and the
appointment and replacement of the director of the internal audit
department; and
(ii) to advise the director of the internal audit department that he or
she is expected to provide to the Audit Committee summaries of and,
as appropriate, the significant reports to management prepared by
the internal audit department and management's responses thereto
and to consider any such summaries, reports or management's
responses thereto;
3. with respect to financial reporting principles and policies and
internal controls and procedures,
(i) to advise management, the internal audit department and the
independent auditors that they are expected to provide to the Audit
Committee a timely analysis of significant financial reporting
issues and practices;
(ii) to consider any reports or communications (and management's and/or
the internal audit department's responses thereto) submitted to the
Audit Committee by the independent auditors relating to the
Company's financial statements;
(iii) to meet with management, the director of the internal audit
department and/or the independent auditors:
- to discuss the scope of the annual audit;
- to discuss the audited financial statements;
A-2
- to discuss any significant matters arising from any audit or
report or communication referred to in items 2(ii) or 3(ii)
above, whether raised by management, the internal audit
department or the independent auditors, relating to the
Company's financial statements;
- to review the form of opinion the independent auditors propose
to render to the Board of Directors and shareholders;
- to discuss significant changes to the Company's auditing and
accounting principles, policies, controls, procedures and
practices proposed or contemplated by the independent auditors,
the internal audit department or management; and
- to inquire about significant risks and exposures, if any, and
the steps taken to monitor and minimize such risks;
(iv) to obtain from the independent auditors assurance that the audit
was conducted in a manner consistent with Section 10A of the
Securities Exchange Act of 1934, as amended, which sets forth
certain procedures to be followed in any audit of financial
statements required under the Securities Exchange Act of 1934; and
(v) to discuss with the Company's General Counsel any significant legal
matters that may have a material effect on the financial statements
and the Company's compliance policies, including material notices to
or inquiries received from governmental agencies; and
4. with respect to reporting and recommendations,
(i) to prepare the report of the Audit Committee required by the rules
of the Securities and Exchange Commission to be included in the
Company's annual proxy statement;
(ii) to review this Charter at least annually and recommend any changes
to the full Board of Directors; and
(iii) to report its activities to the full Board of Directors on a
regular basis and to make such recommendations with respect to the
above and other matters as the Audit Committee may deem necessary
or appropriate.
V. Resources and Authority of the Audit Committee: The Audit Committee shall
have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage independent auditors for
special audits, reviews and other procedures and to retain special counsel
and other experts or consultants.
A-3
RECYCLED PAPER LOGO
[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 2002 Annual Meeting of Shareowners
of Delta to be held at the Renaissance Mayflower Hotel, 1127
Connecticut Avenue, N.W., Washington, D.C. 20036, on Friday, April 26,
2002 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, 2002, Proxy Statement and Annual Report.
NOMINEES FOR DIRECTOR:
(01) James L. Broadhead, (02) Edward H. Budd, (03) George M.C. Fisher,
(04) David R. Goode, (05) Gerald Grinstein, (06) Leo F. Mullin, (07)
John F. Smith, Jr., (08) Joan E. Spero and (09) Andrew J. Young.
[See Reverse Side]
-------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET
Delta's 2002 Annual Meeting of Shareowners will be broadcast
live (listen only) at www.delta.com/inside/investors/index.jsp.
The live Webcast will begin at 10:30 a.m. ET on Friday,
April 26, 2002. The replay will be available through May 26,
2002.
ADMISSION TICKET
Only the shareowner(s) whose name appear(s) on this ticket, or the
proxy of that shareowner, will be admitted. Due to space limitations,
admission to the meeting will be on a first-come, first-served basis.
Registration will begin at 8:30 a.m., local time.
DELTA AIR LINES, INC.
2002 ANNUAL MEETING OF SHAREOWNERS
FRIDAY, APRIL 26, 2002, 10:30 A.M., LOCAL TIME
THE RENAISSANCE MAYFLOWER HOTEL
1127 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
CONDUCT OF MEETING
In fairness to all shareowners attending the 2002 Annual Meeting of
Shareowners and in the interest of an orderly and constructive meeting,
the following procedures will apply:
1. Proposals will be presented in the order in which they appear
in the Proxy Statement. Presentations by proponents of
shareowner proposals may not exceed a total of five minutes.
Questions or comments about any proposal under consideration
should be limited to two minutes.
2. Questions or comments concerning any issue raised during the
shareowner question and comment period should be relevant to
matters of general interest to shareowners and will be limited
to two minutes.
3. The use of cameras, sound recording equipment, communication
devices or any other similar equipment is prohibited without
Delta's prior permission.
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
Delta's Board of Directors recommends a vote FOR all nominees and FOR Proposal 2.
WITHHOLD
1. Election of FOR ALL AUTHORITY 2. To ratify the FOR AGAINST ABSTAIN
Nominees for [ ] [ ] appointment of [ ] [ ] [ ]
Director. Deloitte & Touche LLP
(see reverse) as independent
auditors for the year
except as indicated below to vote for all ending December 31,
2002.
For all, except vote withheld from the following nominee(s):
Delta's Board of Directors recommends a vote AGAINST Proposals 3 and 4, which
were submitted by shareowners.
FOR AGAINST ABSTAIN
3. Relating to cumulative [ ] [ ] [ ]
voting for directors.
4. Relating to executive [ ] [ ] [ ]
severance agreements.
I PLAN TO ATTEND THE [ ]
ANNUAL MEETING OF
SHAREOWNERS YES
This proxy, if properly executed and delivered, will revoke all prior
proxies.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SIGNATURE(S) DATE
----------------------------------------------- ------------
Please sign EXACTLY as your name(s) appears hereon. When signing as
administrator, attorney, executor, guardian or trustee, please give your full
title. If the shareowner is a corporation or partnership, please sign the full
corporate or partnership name by a duly authorized person. If shares are held
jointly, each joint owner should sign.
-------------------------------------------------------------------------------
* FOLD AND DETACH HERE -- IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL *
VOTE BY INTERNET OR TELEPHONE
QUICK & EASY - 24 HOURS A DAY, 7 DAYS A WEEK
Delta encourages shareowners to take advantage of two cost-effective and
convenient alternatives to vote their shares -- by Internet or telephone.
LOG ONTO THE INTERNET AND TYPE: HTTP://WWW.EPROXYVOTE.COM/DAL
- Have this proxy form ready and follow the simple instructions on the
web site.
ON A TOUCH TONE PHONE, CALL TOLL-FREE 1-877-779-8683.
- Enter the control number from the box above (just below the perforation
on the proxy card).
- You will then have two options:
OPTION 1: to vote as the Board of Directors recommends on all
proposals; or
OPTION 2: to vote on each proposal separately.
- You will be asked to confirm your vote.
INTERNET OR TELEPHONE VOTING PROVIDES THE SAME AUTHORIZATION TO VOTE YOUR SHARES
AS IF YOU MARKED, SIGNED, DATED AND RETURNED THE PROXY CARD. IF YOU VOTE BY
INTERNET OR TELEPHONE, PLEASE DO NOT RETURN YOUR PROXY CARD.
-------------------------------------------------------------------------------
TO RECEIVE FUTURE ANNUAL MEETING MATERIALS VIA THE INTERNET,
SIGN UP AT WWW.DELTA.COM/INSIDE/INVESTORS/INDEX.JSP.
-------------------------------------------------------------------------------
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 2002 Annual Meeting of Shareowners of Delta Air
Lines, Inc. (Delta) to be held at the Renaissance Mayflower Hotel, 1127
Connecticut Avenue, N.W., Washington, D.C. 20036, on Friday, April 26,
2002 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 page 3 of 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 24,
2002; 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, 2002 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, 2002, Proxy Statement and Annual Report.
NOMINEES FOR DIRECTOR:
(01) James L. Broadhead, (02) Edward H. Budd, (03) George M.C. Fisher,
(04) David R. Goode, (05) Gerald Grinstein, (06) Leo F. Mullin, (07)
John F. Smith, Jr., (08) Joan E. Spero and (09) Andrew J. Young.
[See Reverse Side]
-------------------------------------------------------------------------------
DETACH AND RETURN VOTING INSTRUCTION FORM; RETAIN ADMISSION TICKET
-------------------------------------------------------------------------------
Delta's 2002 Annual Meeting of Shareowners will be broadcast
live (listen only) at www.delta.com/inside/investors/index.jsp.
The live Webcast will begin at 10:30 a.m. ET on Friday,
April 26, 2002. The replay will be available through May 26,
2002.
-------------------------------------------------------------------------------
ADMISSION TICKET
Only the Savings Plan participant whose name appear(s) on this ticket will be
admitted. Due to space limitations, admission to the meeting will be on a
first-come, first-served basis. Registration will begin at 8:30 a.m., local
time.
DELTA AIR LINES, INC.
2002 ANNUAL MEETING OF SHAREOWNERS
FRIDAY, APRIL 26, 2002, 10:30 A.M., LOCAL TIME
THE RENAISSANCE MAYFLOWER HOTEL
1127 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
CONDUCT OF MEETING
In fairness to all shareowners attending the 2002 Annual Meeting of Shareowners
and in the interest of an orderly and constructive meeting, the following
procedures will apply:
1. Proposals will be presented in the order in which they appear in the
Proxy Statement. Presentations by proponents of shareowner proposals
may not exceed a total of five minutes. Questions or comments about any
proposal under consideration should be limited to two minutes.
2. Questions or comments concerning any issue raised during the shareowner
question and comment period should be relevant to matters of general
interest to shareowners and will be limited to two minutes.
3. The use of cameras, sound recording equipment, communication devices or
any other similar equipment is prohibited without Delta's prior
permission.
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
DELTA FAMILY-CARE SAVINGS PLAN VOTING INSTRUCTIONS FORM
Delta's Board of Directors recommends a vote FOR all nominees and FOR Proposal 2.
WITHHOLD
1. Election of FOR ALL AUTHORITY 2. To ratify the FOR AGAINST ABSTAIN
Nominees for [ ] [ ] appointment of [ ] [ ] [ ]
Director. Deloitte & Touche LLP
(see reverse) as independent
auditors for the year
except as indicated below to vote for all ending December 31,
2002.
For all, except vote withheld from the following nominee(s):
Delta's Board of Directors recommends a vote AGAINST Proposals 3 and 4, which
were submitted by shareowners.
FOR AGAINST ABSTAIN
3. Relating to cumulative [ ] [ ] [ ]
voting for directors.
4. Relating to executive [ ] [ ] [ ]
severance agreements.
I PLAN TO ATTEND THE [ ]
ANNUAL MEETING OF
SHAREOWNERS YES
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.
SIGNATURE(S) DATE
----------------------------------------------- ------------
Please sign EXACTLY as your name(s) appears hereon. When signing as
administrator, attorney, executor, guardian or trustee, please give your full
title.
-------------------------------------------------------------------------------
* FOLD AND DETACH HERE -- IF YOU ARE RETURNING
YOUR VOTING INSTRUCTION FORM BY MAIL *
VOTE BY INTERNET OR TELEPHONE
QUICK & EASY - 24 HOURS A DAY, 7 DAYS A WEEK
Delta encourages Savings Plan participants to take advantage of two
cost-effective and convenient alternatives to instruct the Trustee on how to
vote their shares -- by Internet or telephone.
LOG ONTO THE INTERNET AND TYPE: HTTP://WWW.EPROXYVOTE.COM/DAL
- Have this Voting Instruction Form ready and follow the simple
instructions on the web site.
ON A TOUCH TONE PHONE, CALL TOLL-FREE 1-877-779-8683.
- Enter the control number from the box above (just below the perforation
on the Voting Instruction Form).
- You will then have two options:
OPTION 1: to vote as the Board of Directors recommends on all
proposals; or
OPTION 2: to vote on each proposal separately.
- You will be asked to confirm your voting instructions.
Using the Internet or telephone voting instruction system has the same effect as
giving the Trustee voting instructions by marking, signing, dating and returning
the Voting Instruction Form. If you use the Internet or telephone voting
instruction system, please do not return your Voting Instruction Form.
OTHER INSTRUCTIONS
Your voting instructions must be received by the Trustee on or before 5:00 p.m.,
ET on April 24, 2002. This deadline applies whether you mail the Voting
Instruction Form, or use the Internet or telephone voting instruction system.
-------------------------------------------------------------------------------
TO RECEIVE FUTURE ANNUAL MEETING MATERIALS VIA THE INTERNET,
SIGN UP AT WWW.DELTA.COM/INSIDE/INVESTORS/INDEX.JSP.
-------------------------------------------------------------------------------
[DELTA LOGO]
INTERNAL MEMORANDUM
DATE: March 25, 2002
TO: Participants in the Delta Family-Care Savings Plan
FROM: Leo F. Mullin, Chairman and Chief Executive Officer
SUBJECT: DELTA'S 2002 ANNUAL MEETING OF SHAREOWNERS
As a participant in the Delta Family-Care Savings Plan (Savings Plan), you have
the right to confidentially instruct 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 2002 Annual Meeting of Shareowners. I
strongly encourage you to exercise this right because 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, 2002 (Proposal 2); and
- AGAINST each of the two shareowner proposals described in the
proxy statement (Proposals 3 and 4).
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. 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. Delta's Annual Meeting will be broadcast live online (listen only) on
April 26, 2002 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 26, 2002.
Enclosed is a copy of Delta's Notice of Annual Meeting of Shareowners, Proxy
Statement and Annual Report. If you were also a registered shareowner of Delta
common stock on the record date for the Annual Meeting, your Annual Report was
previously sent to you with the proxy materials for those shares rather than
with this mailing. If you would like an additional copy of the Annual Report,
please contact Investor Relations at (404) 715-2343 or (866) 715-2170.
/s/ Leo
Leo F. Mullin
Enclosures