-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W0SKEx6WyBj2/aRrS/qkLqfwk8oLN+IlnVQKagJ0XurKYONgDXgBDpFYW0nr65hZ NmWJuQI+5bqZS/j8/IKzjg== 0000950114-98-000180.txt : 19980415 0000950114-98-000180.hdr.sgml : 19980415 ACCESSION NUMBER: 0000950114-98-000180 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980519 FILED AS OF DATE: 19980414 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 431145889 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-07815 FILM NUMBER: 98593266 BUSINESS ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N SIXTH ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3145893000 MAIL ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N 6TH ST CITY: ST LOUIS STATE: MO ZIP: 63101 DEF 14A 1 TRANS WORLD AIRLINES, INC. 1 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 /X/ Definitive Proxy Statement Commission Only / / Definitive Additional Materials (as permitted by Rule / / Soliciting Material Pursuant to 14a-6(e)(2)) Rule 14a-11(c) or Rule 14a-12 TRANS WORLD AIRLINES, INC. - ------------------------------------------------------------------------------ (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) - ------------------------------------------------------------------------------ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX): /X/ 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: COMMON STOCK, PAR VALUE $.01 PER SHARE AND EMPLOYEE PREFERRED STOCK, PAR VALUE $.01 PER SHARE - ------------------------------------------------------------------------------ (2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTIONS APPLIES: 57,916,274 SHARES - ------------------------------------------------------------------------------ (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: - ------------------------------------------------------------------------------ 2 TRANS WORLD AIRLINES, INC. To our Stockholders: On behalf of the Board of Directors, it is our pleasure to invite you to attend the Annual Meeting of Stockholders of Trans World Airlines, Inc. (the "Company"). The meeting will be held at the Norfolk Airport Hilton, 1500 North Military Highway at North Hampton Boulevard, Norfolk, Virginia 23502, on Tuesday, May 19, 1998, at 10:00 a.m. local time. The subjects proposed for action at the meeting are: (i) the election of five Class I directors and five Class II directors, (ii) the ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for the fiscal year ending December 31, 1998, and (iii) the transaction of such other business as may properly come before the meeting or any adjournment thereof. To help us plan for the meeting, please mark the appropriate box on your proxy card telling us if you will be attending in person. It is important that your shares be represented at this meeting in order that the presence of a quorum may be assured. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AND TO DO SO IN ADEQUATE TIME FOR YOUR DIRECTIONS TO BE RECEIVED AND TABULATED PRIOR TO THE SCHEDULED MEETING. Sincerely yours, /s/ Gerald L. Gitner GERALD L. GITNER Chairman of the Board and Chief Executive Officer 3 TRANS WORLD AIRLINES, INC. NOTICE OF MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1998 TO THE STOCKHOLDERS OF TRANS WORLD AIRLINES, INC. NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting") of Trans World Airlines, Inc., a Delaware corporation (the "Company"), will be held on Tuesday, May 19, 1998, at 10:00 a.m., local time, at the Norfolk Airport Hilton, 1500 North Military Highway at North Hampton Boulevard, Norfolk, Virginia 23502, for the purposes of considering and acting upon the following: (1) the election of five Class I directors and five Class II directors of the Company for terms ending with the 1999 Annual Meeting of Stockholders and until their successors are elected and qualified; (2) the ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for the fiscal year ending December 31, 1998; and (3) the transaction of such other business as may properly come before the Meeting or any adjournment thereof. The Board of Directors recommends that you vote, according to your voting rights, "FOR" the nominees for Class I and Class II directorships and further recommends that Stockholders vote "FOR" agenda item 2 above. Abstentions and "broker non-votes" are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Only stockholders of record at the close of business on March 26, 1998, will be entitled to notice of and to vote at the Meeting or any adjournment thereof. The Meeting may be adjourned from time to time without advance notice. A list of stockholders entitled to vote at the Meeting will be available for inspection by any stockholder for any purpose germane to the Meeting, during ordinary business hours, during the ten days prior to the Meeting, at the Company's headquarters located at One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101. By Order of the Board of Directors /S/ Paul J M Rutterer PAUL J. M. RUTTERER Corporate Secretary St. Louis, Missouri April 15, 1998 IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, IN ORDER THAT A QUORUM MAY BE ASSURED. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON, PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN THE UNITED STATES. IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE STOCK IS REGISTERED. 4 TRANS WORLD AIRLINES, INC. ONE CITY CENTRE 515 N. SIXTH STREET ST. LOUIS, MISSOURI 63101 PROXY STATEMENT, DATED APRIL 15, 1998, FOR MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1998 INTRODUCTION VOTE BY PROXY This proxy statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Trans World Airlines, Inc. (the "Company" or "TWA") from the holders of the Company's common stock, $.01 par value per share (the "Common Stock"), and the Company's preferred stock issued in three series to TWA union employees, $0.01 par value per share (the "Employee Preferred Stock"), which are the series of capital stock of the Company entitled to vote at the Meeting (the Common Stock and the Employee Preferred Stock are sometimes referred to collectively herein as the "Voting Stock"), for use at the Annual Meeting of Stockholders to be held on Tuesday, May 19, 1998, at 10:00 a.m., local time, and any adjournment or postponement thereof (the "Meeting"), for the purposes set forth in the accompanying Notice of Meeting and described in detail herein. This Proxy Statement, together with a form of proxy, is first being mailed to security holders on or about April 15, 1998. All properly executed proxies in the form enclosed received in time for the Meeting will be voted, according to their voting rights and in accordance with the instructions contained thereon and, if no choice is specified, proxies will be voted, according to their voting rights, FOR the election of the five nominees for Class I directors and the five nominees for Class II directors named herein and FOR Agenda Item Two described herein. Any person giving a proxy pursuant to this Proxy Statement may revoke it at any time before it is exercised by filing with the Corporate Secretary of the Company, at the address of the Company stated above, a written notice of such revocation or a duly executed proxy bearing a later date. In addition, if a person executing a proxy is present at the Meeting, such person may, but need not, revoke his or her proxy, by notice of revocation to the Secretary of the Meeting, and vote such person's shares in person. Proxies, if in the form enclosed, duly signed and received in time for voting, and not revoked before they are voted, will be voted at the Meeting in accordance with the instructions specified therein. Certain beneficial holders of Voting Stock will receive proxy materials pursuant to the federal securities laws, even though, with respect to certain matters, such beneficial holders do not have the right to vote the shares of Voting Stock which they hold beneficially and do not have the right to direct the registered holder of such shares with respect to the manner in which such shares are to be voted. See "Outstanding Shares and Voting Rights." COST OF PROXY SOLICITATION The cost of soliciting proxies will be borne by the Company. Proxies may be solicited by the Company's directors, officers and regular employees, without separate remuneration, in person or by telephone, facsimile transmission, telegram or mail. It is anticipated that banks, 5 brokerage houses and other custodians, nominees and fiduciaries will forward soliciting material to beneficial owners of Common Stock and such persons will be reimbursed for out-of-pocket expenses incurred by them in connection therewith in accordance with the regulations of the Securities and Exchange Commission (the "SEC") for sending proxies and proxy materials to the beneficial owners of shares of the Common Stock. In connection with the Meeting, the Company has retained D.F. King & Co. ("D.F. King") 77 Water Street, Twentieth Floor, New York, New York 10005, to assist the Company in the distribution and solicitation of proxies. D.F. King's services may include the delivery of proxy materials to brokers, nominees, fiduciaries and other custodians of the Common Stock for distribution to the beneficial owners of such Common Stock, as well as the solicitation of proxies from such beneficial owners. The Company has agreed to pay D.F. King a solicitation fee of $7,500 plus $3.00 per telephone contact and to reimburse D.F. King for all reasonable out-of-pocket expenses incurred by it in connection with its activities on behalf of the Company. The Annual Report of the Company for the year ended December 31, 1997, including financial statements (the "Annual Report"), is being mailed prior to or concurrently with this Proxy Statement to all holders of record of Voting Stock as of March 26, 1998 (the "Record Date"), except for accounts where the holder has filed a written request to eliminate duplicate reports. In addition, the Company has provided brokers, dealers, banks, voting trustees and their nominees, at Company expense, with additional copies of the Annual Report so that such record holders could supply such material to beneficial owners as of the Record Date. OUTSTANDING SHARES AND VOTING RIGHTS The Common Stock and the Employee Preferred Stock, which are together referred to as the Voting Stock, are the only two classes of the Company's securities with general voting rights, with each share of Voting Stock entitled to vote on each matter properly coming before the Meeting other than for the election of directors. The Common Stock and Employee Preferred Stock have separate voting rights with respect to the election of directors. As of the Record Date, the Company had a total of 51,896,129 shares of Common Stock issued and outstanding and 6,020,145 shares of Employee Preferred Stock issued and outstanding. Only holders of record as of the close of business on the Record Date will be entitled to vote at the Meeting. As of the Record Date, there were 21,606 holders of record of Common Stock and nine holders of record of Employee Preferred Stock. Pursuant to the terms of trusts established for the benefit of TWA employees represented by the Air Line Pilots Association, International ("ALPA"), the International Association of Machinists and Aerospace Workers (the "IAM"), as well as employees of the Company not represented by labor unions, the participants of such trusts, as beneficial holders of the Voting Stock, do not have the right to direct the manner in which such shares are voted by the trustees of each trust with respect to any of the agenda items for the Meeting. Such trusts are the TWA Air Line Pilots Supplemental Stock Plan (the "ALPA Trust"), the TWA Air Line Pilots 1995 Employee Stock Ownership Plan (the "ALPA ESOP Trust"), the IAM Trans World Airlines Employees' Stock Ownership Plan (the "IAM Trust"), the IAM Trans World Airlines Employees' Stock Ownership Plan for Flight Attendants (the "Flight Attendant Trust"), and the Trans World Airlines, Inc. Employee Stock Ownership Plan (the "Other Employee Trust"). The Independent Federation of Flight Attendants ("IFFA") previously represented the Company's flight attendants. However, on March 6, 1997, the National Mediation Board certified the IAM as the bargaining representative for TWA's flight attendants. The IAM has advised the Company that it will exercise control of the Flight Attendant Trust. Only the trustees of such trusts will receive proxy cards. Although each beneficial holder of the Voting Stock held by such trusts will receive a copy of this Proxy Statement and an Annual Report pursuant to rules promulgated by the SEC, none of such beneficial holders will receive a proxy card since the trustees, as the record holders, will cast the votes for such shares. The Employee Preferred Stock is comprised of three series: the ALPA Preferred Stock, the IAM Preferred Stock and the IFFA Preferred Stock (the "Flight Attendant Preferred Stock"). The holders of ALPA Preferred 2 6 Stock are entitled to elect one director to the Board of Directors of the Company (the "Board of Directors" or the "Board"), the holders of IAM Preferred Stock are entitled to elect two directors, and the holders of the Flight Attendant Preferred Stock are entitled to elect one director. At the Company's 1996 annual meeting of stockholders, the holder of the IAM Employee Preferred Stock elected one Class III director for a term expiring in 1999. Holders of ALPA Preferred Stock, IAM Preferred Stock and Flight Attendant Preferred Stock each will be entitled to vote for the election of one Class II director at the Meeting. The holders of Common Stock will be entitled to elect all five members of Class I and the two other Class II directors. Holders of the majority of the outstanding shares of each series of Employee Preferred Stock, if present in person or represented by proxy, will constitute a quorum at the Meeting for the purpose of electing each of the respective directors which such respective Employee Preferred Stock is entitled to elect (the "Employee Directors"). Holders of a majority of the outstanding shares of the Common Stock, if present in person or represented by proxy, will constitute a quorum at the Meeting for the purpose of electing the five Class I and two Class II non-Employee Directors. Holders of a majority of the outstanding shares of Voting Stock, if present in person or represented by proxy, will constitute a quorum at the Meeting for the purpose of transacting all other business to be conducted at the Meeting. Abstentions and broker non-votes are counted for the purposes of determining the presence or absence of a quorum for the transaction of business. For all other matters other than the right to elect directors, shares of Employee Preferred Stock are equivalent to shares of Common Stock for voting purposes. Therefore, the total vote required to approve any matter other than the election of directors will be the required percentage of Voting Stock. The five Class I and the two Class II non-Employee Directors will be elected by a plurality of the votes of the shares of Common Stock present in person or represented by proxy and casting votes for the position on the Board which that nominee represents. Employee Directors electable by the applicable series of Employee Preferred Stock will be elected by a plurality of the votes of the shares of such series of Employee Preferred Stock present in person or represented by proxy casting votes for the position on the Board which that nominee represents. Accordingly, abstentions and broker non-votes will have no effect on the outcome of the election of directors. The ratification of auditors must be approved by the affirmative vote of the holders of a majority of the outstanding shares of Voting Stock entitled to vote thereon present or represented by proxy at the Meeting and casting votes. Abstentions and broker non-votes will have no effect on ratification of the selection of auditors. The Certificate of Incorporation does not contemplate cumulative voting. Accordingly, holders of a majority of the shares of Common Stock voting in an election of directors can, if they choose to do so, elect one hundred percent (100%) of these directors. The IAM Trust and the Flight Attendant Trust. Pursuant to the terms of each of the IAM Trust and the Flight Attendant Trust, for matters calling for the approval of the holders of the Voting Stock, a plan trustee committee for each trust will instruct Fleet National Bank, N.A., as trustee for the IAM Trust, and the American Stock Transfer & Trust Company ("AST"), as trustee for the Flight Attendant Trust, respectively, on how to vote the Voting Stock held in the applicable trust. For this purpose, a plan trustee committee may, but is not obligated to, instruct the plan trustee to vote such Voting Stock in a given manner or to solicit proxies from each participant or beneficiary designating the manner in which the shares of Voting Stock allocated to his or her stock account shall be voted. The plan trustee committees for each of the IAM Trust and the Flight Attendant Trust have informed the Company that they have elected to instruct the respective plan trustee to vote the Voting Stock. The plan trustee committee for the IAM Trust is composed of one or more individuals selected by the IAM. The current members of such committee are William O'Driscoll and Gary Poos. The plan trustee 3 7 committee for the Flight Attendant Trust is composed of one or more members selected by the IAM. The current members of such committee are William O'Driscoll, Sherry Cooper and Rocky Miller. The ALPA Trust. Under the ALPA Trust, Joseph A. Chronic, Howard L. Coldwell, Jr. and Scott A. Schwartz, as co-trustees of the ALPA Trust, have the power to determine, in their sole and absolute discretion, how to vote the Voting Stock held in (or entitled to be received by) such trust. The trustees' decision on the manner of voting the stock held by such trust shall be final and binding on all employees, pilot retirees, beneficiaries, and any parties covered by such trust. The ALPA ESOP Trust. Pursuant to the terms of the ALPA ESOP Trust, for matters calling for the approval of the holders of the Voting Stock, a plan ESOP committee will instruct AST, as trustee for the ALPA ESOP Trust, on how to vote the Voting Stock held in the trust. For this purpose, the plan ESOP committee may, but is not obligated to, instruct the plan trustee to vote such Voting Stock in a given manner or to solicit proxies from each participant or beneficiary designating the manner in which the shares of Voting Stock allocated to his or her stock account shall be voted. The plan ESOP committee has informed the Company that they have elected to instruct the plan trustee to vote the Voting Stock. The plan ESOP committee for the ALPA ESOP Trust is composed of three or more individuals selected by ALPA. The current members of such committee are David F. LaRocque, Scott A. Schwartz and Robert C. Stow. The Other Employee Trust. The voting rights of all shares of Common Stock held in the Other Employee Trust are exercisable by Boston Safe Deposit and Trust Company as trustee for such trust in accordance with the provisions of the plan for such trust. Under the Other Employee Trust, the trustee upon direction of a designated committee has the power to vote shares of Common Stock held in the trust and exercise any other rights or privileges associated with such Common Stock in accordance with the terms of the plan for such trust. Such committee may authorize the trustee to exercise any power without specific directions or other instructions from such committee with respect to which direction from such committee is called for in the Other Employee Trust Agreement. Such committee is composed of Michael J. Palumbo, Senior Vice President and Chief Financial Officer, Kathleen A. Soled, Senior Vice President and General Counsel of the Company, and James F. Martin, Senior Vice President, Human Resources of the Company. AGENDA ITEM ONE ELECTION OF CLASS I AND CLASS II DIRECTORS DIRECTORS AND EXECUTIVE OFFICERS: INFORMATION REGARDING DIRECTORS The number of directors on the Board of Directors currently has been fixed at fifteen. Directors serve until that annual meeting of stockholders at which their term of office expires. In the case of a vacancy, other than a vacancy in a seat to which Employee Preferred Stockholders are entitled to fill, the Board of Directors may elect another director as a replacement or leave the vacancy unfilled. Nominations by stockholders may be made in accordance with the Amended and Restated By-laws of the Company (the "By-laws"), which require advance notice be given to the Company and require that certain information be furnished for stockholder nominations for directors. Proxies received from holders of Common Stock and Employee Preferred Stock will be voted for the election of the applicable nominees named below as Class I and Class II directors for a term expiring at the 1999 Annual Meeting of Stockholders, unless authority to do so is withheld. In the event any nominee is unable or 4 8 declines to serve as a director at the time of the Meeting, the persons named as proxies therein will have discretionary authority to vote the proxies for the election of such person or persons as may be nominated in substitution therefor by the applicable management of the Company, the IAM or ALPA, as the case may be. Management knows of no current circumstances which would render any nominee named herein unable to accept nomination or election. The only seats on the Board of Directors for which elections will be held this year are the five Class I and the five Class II directorships. Biographical information furnished to the Company by each director is set forth below: NOMINEES FOR ELECTION AND REELECTION AS CLASS I AND CLASS II DIRECTORS John W. Bachmann, age 59, has been a director of TWA since April 1, 1996. Mr. Bachmann has been Managing Principal of Edward Jones since January 1980. Mr. Bachmann serves as Chairman of the St. Louis Regional Commerce and Growth Association/Civic Progress panel studying airport expansion and modernization in St. Louis. Mr. Bachmann served as a member of the U.S. Steering Committee for the Group of 30 and chaired its securities settlement implementation task force in 1989. He also served two consecutive terms as Chairman of the Securities Industry Association from 1987 to 1989. Mr. Bachmann has served as a member of the Board of Governors of the Chicago Stock Exchange and as a member of the Regional Firms Advisory Board of the New York Stock Exchange. He is the Chairman of the St. Louis Symphony Society and a Trustee of Washington University and Wabash College. He is a member of the Board of Visitors of the Peter F. Drucker Center. Mr. Bachmann's term of office as a director expires with the annual meeting of stockholders in 1998. William F. Compton, age 50, was elected President and Chief Operating Officer of the Company on December 3, 1997. Prior to that he had served as Executive Vice President--Operations since March 13, 1997. He had been acting in such position since December 14, 1996. He was the ALPA-designated director of TWA from November 3, 1993 until March, 1997, at which time he resigned and was appointed a management-designated director. A pilot for TWA since September 13, 1968, Mr. Compton was an Executive Board Member and Master Chairman of the TWA Master Executive Council ("MEC") of ALPA from September 1991 to September 11, 1995, Coordinator for the Company's Productivity Task Force until September 6, 1995, a member of the TWA Labor Advisory Committee from August 1992 until September 1995. He was Chairman of the TWA MEC Negotiating Committee from March 1988 to September 1991, a member of the ALPA National Collective Bargaining Committee from June 1988 to June 1990, and a member of the TWA MEC Negotiating Committee from June 1986 to March 1988. Mr. Compton's term of office as a director expires with the Annual Meeting of Stockholders in 1998. Mr. Compton serves as an officer of the Company at the pleasure of the Board of Directors. Eugene P. Conese, age 68, has been a director of TWA since November 3, 1993. Mr. Conese is a member of the Board of Directors of Renex Corporation, where he is Chairman of the Compensation Committee. He is also on the Board of Iona College and a Board member of the Conese Foundation. Mr. Conese is Chairman and Chief Executive Officer of World Air Lease, Inc., since 1989, and is a consultant to General Electric Company's Engine Services. Until its sale in September 1997 to General Electric Company, Mr. Conese served as Chairman and Chief Executive Officer of Greenwich Air Services, Inc. which he founded in 1987. He was a founder of The Greenwich Company Ltd. and served as Chairman of the Board and Chief Executive Officer from August 1980 until 1995, when it was merged with and into Greenwich Air Services. He also served as Chief Executive Officer and Director of Irvin Industries, Inc. Mr. Conese's term of office as director expires with the Annual Meeting of Stockholders in 1998. Sherry L. Cooper, age 46, has been nominated to be the Flight Attendant Preferred Stock designated director of TWA. Ms. Cooper has been a TWA flight attendant since May, 1975. Ms. Cooper has been the 5 9 General Chairperson for TWA flight attendants, IAM District Lodge #142, since August 1997. She was President of IFFA from October 1995 to February 1997. Gerald L. Gitner, age 53, has been Chairman and Chief Executive Officer of TWA since February 12, 1997 (having been Vice Chairman and Acting Chief Executive Officer since December 14, 1996) and a director of TWA since November 3, 1993. He has been Chairman of Avalon Group, Ltd. since April 1992, and Co- Chairman of Global Aircraft Leasing Ltd. since 1990. Mr. Gitner was Vice Chairman of Tribeca Corporation from February 1990 to December 1991, Chairman of Tribeca Corporation from December 1991 to March 1992, and President and Chief Executive Officer, ATASCO USA Inc. from September 1986 to December 1989. Mr. Gitner was President of Texas Air Corp. from 1985 to 1986, Chairman and Chief Executive Officer of Pan American World Services from 1983 to 1985 and Vice Chairman of Pan American World Airways Inc. from 1983 to 1985. He was a founder of People Express Airlines, Inc. and served as its President from 1980 to 1982. Mr. Gitner is a director of ICTS International, N.V. and was a trustee of Boston University from 1984 to 1996. He is a member of the Chancellor's Council of the University of Missouri - St. Louis and serves as a trustee of The American College of Management in Dubrovnik, Croatia. Mr. Gitner's term of office as a director expires with the Annual Meeting of Stockholders in 1998. Mr. Gitner serves as an officer of the Company at the pleasure of the Board of Directors. Myron Kaplan, age 53, has been a director of TWA since November 3, 1993. He has been a partner in the law firm of Kleinberg, Kaplan, Wolff & Cohen, P.C. since 1972. Mr. Kaplan's term of office as a director expires with the Annual Meeting of Stockholders in 1998. General Merrill A. McPeak (USAF, Ret.), age 62, has been a director of TWA since May 29, 1997. He is Chairman of the Board of ECC International Corp. and a director of Praegitzer Industries, Tektronix, Inc., and Thrustmaster, Inc. General McPeak was Chief of Staff, United States Air Force, 1990-1994, Commander-in-Chief, Pacific Air Forces, 1988-1990 and Commander, 12th Air Force, 1987-1988. He serves on the national boards of the Air Force Association, the National Aeronautic Association and the International Aerobatic Club. General McPeak's term of office as a director expires with the Annual Meeting of Stockholders in 1998. Brent S. Miller, age 54, has been nominated to be the ALPA-designated director of TWA. Mr. Miller is a pilot for TWA and has been employed by the Company in various pilot positions since October 1966. William O'Driscoll, age 69, has been a director of TWA since November 3, 1993. Mr. O'Driscoll has been President and Directing General Chairman of IAM District Lodge 142 since August 1990. He is an IAM-designated director. Mr. O'Driscoll's term of office as a director expires with the Annual Meeting of Stockholders in 1998. Blanche M. Touhill, age 66, has been a director of TWA since May 29, 1997. She is Chancellor, since 1991, and Professor of History and Education at the University of Missouri-St. Louis. She was Interim Chancellor from 1990 to 1991 and Vice Chancellor for Academic Affairs from 1987-1991. Ms. Touhill is a director of Delta Dental, Christian Health Services, the Missouri Botanical Garden, the Urban League of Metropolitan St. Louis and the American Conference for Irish Studies. Ms. Touhill's term of office as a director expires with the Annual Meeting of Stockholders in 1998. THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE "FOR" THE REELECTION OF MESSRS. BACHMANN, COMPTON, CONESE, GENERAL MCPEAK AND MS. TOUHILL AS CLASS I DIRECTORS AND "FOR" THE REELECTION OF MESSRS. GITNER AND KAPLAN AS CLASS II DIRECTORS; HOLDERS OF IAM PREFERRED STOCK VOTE "FOR" THE REELECTION OF MR. O'DRISCOLL; HOLDERS OF THE FLIGHT ATTENDANT PREFERRED STOCK VOTE "FOR" THE ELECTION OF MS. COOPER, AND HOLDERS OF THE ALPA PREFERRED STOCK VOTE "FOR" THE ELECTION OF MR. MILLER. 6 10 CONTINUING DIRECTORS Edgar M. House, age 65, has been a director of TWA since January 28, 1998. He was the former General Vice President of the International Association of Machinists, serving in that capacity from 1989 until his retirement in July 1997 and holding numerous other union offices prior to that position. Mr. House's term of office as director expires with the Annual Meeting of Stockholders in 1999. Thomas H. Jacobsen, age 58, has been a director of TWA since March 21, 1995. He has been President, Chief Executive Officer and Chairman of the Board of Mercantile Bancorporation Inc. since 1989. Mercantile Bank National Association, formerly known as Mercantile Bank of St. Louis National Association, and a subsidiary of Mercantile Bancorporation Inc., has provided in the past and from time to time hereafter may provide depository and/or other banking products to the Company and the Company's affiliates. Mr. Jacobsen was Vice Chairman and director of Barnett Banks, Inc. from 1984 to 1989. He is President of the Federal Reserve System Federal Advisory Council, having previously served as the representative for the Eighth Federal Reserve District. He is Chairman of the St. Louis Area Council of the Boy Scouts of America and is a member of the Executive Board, National Boy Scouts of America and Life Trustee of the St. Louis Symphony Orchestra, having previously served as its Chairman. Mr. Jacobsen's term of office as a director expires with the Annual Meeting of Stockholders in 1999. David M. Kennedy, age 59, has been a director of TWA since October 23, 1996. He was Acting Executive Vice President and Chief Operating Officer of the Company from December 14, 1996 to June 4, 1997. Mr. Kennedy was Chief Executive Officer of Aer Lingus from 1974 to 1988, and has held a variety of positions in the airline industry, including as director of CSA, Czechoslovak Airlines, from 1993 to 1994, member of the International Advisory Committee of Air France from 1991 to 1994, and as Aviation Consultant to the European Bank for Reconstruction and Development and the World Bank. Mr. Kennedy was a director of the Bank of Ireland from 1984 to 1995, where he served as Deputy Governor from 1989-1991. Mr. Kennedy is currently Chairman of the Bank of Ireland Pension Fund, and serves as a director of CRH Plc, Jurys Hotel Group Plc. and as Chairman of Drury Communications Limited. He is a director of Global Aircraft Leasing Ltd. Mr. Kennedy is a part-time lecturer at the Graduate School of Business of the University College Dublin. Mr. Kennedy is a citizen of Ireland. Mr. Kennedy's term of office as a director expires with the Annual Meeting of Stockholders in 1999. Thomas F. Meagher, age 67, has been a director of TWA since November 3, 1993. He was Chairman of the Board from November 14, 1995 to February 12, 1997 and currently serves as Lead Outside Director of the Board. Mr. Meagher has served as Chairman of the Board and Chief Executive Officer of Howell Tractor & Equipment Co. since 1980. He serves as Chairman of Professional Golf Cars of Florida and is a director of Everen Securities. Mr. Meagher was Chairman of Continental Air Transport from 1983 until July 1, 1995 and was Chief Executive Officer of Continental Air Transport from 1983 to 1993. He is a retired director of Lakeside Bank of Chicago and is a former Chairman of the Airport Ground Transportation Association. He was a director of the Greyhound Lines, Inc. from 1991 to 1993 and a consultant from 1993 to 1997. He is a Trustee of St. Mary's University and DePaul University. Mr. Meagher's term of office as a director expires with the Annual Meeting of Stockholders in 1999. G. Joseph Reddington, age 56, has been a director of TWA since November 3, 1993. He has been President and Chief Executive Officer and director of Breuners Home Furnishings Corp. since February 1997. Mr. Reddington has been a director of Loblaw Companies Ltd. since August 1994. Mr. Reddington was a director of Sears Canada, Inc. from January 1985 to February 1994. He was Chairman and Chief Executive Officer of The Signature Group from April 1994 to February 1997, President and Chief Executive Officer of Sears Canada from 1989 to December 1993, and Chief Administrative Officer of Sears Merchandising Group from December 7 11 1988 to December 1989. Mr. Reddington's term of office as a director expires with the Annual Meeting of Stockholders in 1999. William M. Hoffman and Stephen M. Tumblin have not been nominated for reelection by the IAM and ALPA, respectively. EXECUTIVE OFFICERS IN ADDITION TO GERALD L. GITNER AND WILLIAM F. COMPTON Donald M. Casey, age 62, has been Executive Vice President, Marketing since May 29, 1997. Mr. Casey was formerly a principal with Deskey Luxon Carra, a design consulting firm. In 1993, he formed Seabrook Consultants and was President, leaving the firm in 1995. From 1983 to 1993 Mr. Casey worked with Young and Rubicam in a number of executive positions. He previously worked for TWA from 1968 until 1981, including serving as Senior Vice President, Marketing from 1976 to 1981. Mr. Casey serves as an officer of the Company at the pleasure of the Board of Directors. James F. Martin, age 48, was elected Senior Vice President, Human Resources on October 29, 1997. Mr. Martin was Vice President, Operations and Technology of Coors Brewing Company from 1996-1997, Vice President, Human Resources of Harcourt Brace & Company from 1992 to 1995 and Vice President, Human Resources of Macmillan/McGraw-Hill School Publishing Company from 1989 to 1992. Mr. Martin serves as an officer of the Company at the pleasure of the Board of Directors. Michael J. Palumbo, age 51, has been Senior Vice President and Chief Financial Officer of TWA since December 20, 1996. Mr. Palumbo was formerly the Company's Vice President and Treasurer and has been employed by TWA since 1994. Before joining the Company, Mr. Palumbo was a partner in HPF Associates from 1988 to 1994 and Senior Vice President and Transportation Group Head for E.F. Hutton from 1984 to 1988. Mr. Palumbo had previously served as Senior Vice President, Finance and Treasurer of Western Airlines from 1983 to 1984 and Assistant Treasurer of Pan American World Airways from 1977 to 1983. Mr. Palumbo serves as an officer of the Company at the pleasure of the Board of Directors. Kathleen A. Soled, age 40, was elected Senior Vice President and General Counsel of TWA on January 28, 1998. Ms. Soled was formerly the Company's Vice President, Legal and Corporate Secretary and has been employed by TWA since January, 1992. Prior to that, she was an attorney in private practice. Ms. Soled serves as an officer of the Company at the pleasure of the Board of Directors. DIRECTORS' FEES AND COMPENSATION The Board of Directors may establish the compensation for, and reimbursement of the expenses of, directors for membership on the Board of Directors and on committees of the Board of Directors, attendance at meetings of the Board of Directors or committees of the Board of Directors, and for other services rendered by directors to the Company or any of its majority-owned subsidiaries. Directors of TWA during 1997 who were not also regularly salaried employees or active union representatives of TWA employees ("Outside Directors") were entitled to receive an annual retainer of $20,000, payable quarterly in advance. Committee chairpersons were entitled to receive an annual retainer of $1,500, prorated from the date of the committee chairperson's appointment and payable quarterly in arrears. Board members were also entitled to receive fees of $2,000 for each regular meeting attended, $1,500 for each meeting attended via telephone conference call and $1,000 for each special meeting of the Board attended, whether in person or by telephone conference call, along with fees of $500 for attending committee meetings held on a day of a Board meeting and $1,000 for committee meetings held on a day other than the day of a Board meeting. Regularly salaried executive officers of TWA or active union representatives of TWA employees who are also Board members did not receive any supplemental compensation for their services as directors. All directors are 8 12 reimbursed for expenses incurred in attending Board and committee meetings. The Lead Outside Director was entitled, during 1997, to receive an annual retainer of $30,000 and meeting fees fifty percent in excess of those paid to Outside Directors. Outside Directors of TWA, their spouses and eligible dependent children receive unlimited positive space pass privileges on TWA, with tax reimbursement related to income imputed from pass usage to be paid in an amount not to exceed $10,000 per year. Imputed income together with cash payments to such directors aggregated approximately $47,809 for 1997. The stockholders of TWA approved the Company's 1995 Outside Directors' Stock Ownership and Stock Option Plan (the "Outside Directors' Plan") at the Company's 1995 Annual Meeting of Stockholders. The Outside Directors' Plan as amended, subject to any trading restrictions imposed by applicable securities laws, requires Outside Directors to own one thousand (1,000) shares of Common Stock (the "Required Shares") upon the date on which an individual is elected an Outside Director. Outside Directors whose term of service on the board began before the 1995 Annual Meeting of Stockholders are additionally entitled to purchase two thousand (2,000) shares of Common Stock (the "Permissive Shares") pursuant to the Outside Directors Plan, with no requirement that such Outside Director continue to hold such shares. The purchase price for both Required Shares and Permissive Shares is (x) $4.1875, the subscription price of the Company's September 1995 equity rights offering, if the Outside Director's current term of service on the Board began at or before the Company's 1995 Annual Meeting of Stockholders and (y) the Fair Market Value (as defined in the Outside Directors' Plan) of the Common Stock on the date of purchase for all other Outside Directors. Pursuant to the Outside Directors' Plan, each Outside Director is permitted to make annual elections, with respect to some or all of the retainer amounts payable to him or her in consideration for his or her service on the Board, to (i) receive such retainer in shares of Common Stock instead of cash; (ii) defer retainer amounts and participate in a "phantom stock" program; (iii) receive some combination of cash and Common Stock for all of his or her retainer; or (iv) receive some combination of cash and Common Stock for some portion of his or her retainer and to defer the remainder. Outside Directors electing to receive shares of Common Stock in lieu of some or all of the cash retainer payment to which he or she would otherwise be entitled would receive a number of shares of Common Stock calculated by dividing the percentage of his or her retainer such Outside Director elected to receive in shares of Common Stock times the Outside Director's retainer fee by the Fair Market Value of the Common Stock on the date such retainer became payable. Outside Directors electing to defer some or all of the retainer to which he or she was entitled would be credited, through a "Deferred Retainer Account," with a number of shares of Common Stock calculated by dividing the percentage of his or her retainer such Outside Director elected to defer times their retainer by (x) $4.1875 for retainer amounts payable for 1996 to Outside Directors whose term of service began at or before the Company's 1995 Annual Meeting of Stockholders; and (y) the Fair Market Value of the Common Stock on the date on which the retainer became payable for all other Outside Directors. Upon the earlier to occur of (i) December 31, 2000, and (ii) the 60th day following the last date of a participating Outside Director's service on the Board, each participating Outside Director would be entitled to a payment consisting of cash, Common Stock, or a combination of the two. In addition, the Outside Directors' Plan provides for an annual grant of 1,500 stock options beginning on the later of January 1, 1997 or the first day of January next following the first anniversary of qualification as an Outside Director. Such options vest on the six-month anniversary of the grant. The per share exercise price of options granted under the Outside Directors' Plan is the Fair Market Value per share of the common stock on the date of grant. 9 13 CERTAIN TRANSACTIONS Stephen M. Tumblin, a current director who has not been nominated for re-election, is a partner with the law firm of LeBoeuf, Lamb, Greene & MacRae ("LeBoeuf") which represents ALPA. Pursuant to certain agreements, the Company is required to pay the fees of ALPA's legal counsel including LeBoeuf. LeBoeuf has not been retained by the Company or done any work for the Company in 1996 or 1997. In addition, LeBoeuf represents Pacific Aviation Holding Company, an aircraft lessor from which the Company leases aircraft. Mr. Tumblin did not participate in or give legal counsel regarding any such leasing transactions. Gerald L. Gitner is a director of ICTS International, N.V. ("ICTS") which performs security services for the Company at Charles de Gaulle airport in Paris. In 1997, the Company paid ICTS the equivalent of approximately $984,450. Myron Kaplan is a partner in the law firm of Kleinberg, Kaplan, Wolff and Cohen, P.C. ("Kleinberg"). Kleinberg represents an aircraft owner which is currently in negotiations to sell certain aircraft to the Company. Mr. Kaplan has not participated in or given legal counsel regarding the negotiations. MEETINGS AND COMMITTEES OF THE BOARD During 1997, the Board of Directors held six regular meetings and three special meetings. All incumbent directors attended at least 75% of the total number of meetings of the Board of Directors and any committee of the Board of Directors on which they served. GOVERNANCE OF THE COMPANY In accordance with applicable Delaware state law, the business of the Company is managed under the direction of the Board of Directors. There are currently five standing committees of the Board of Directors. Under the By-laws and pursuant to the Board's determination, a majority of members of the Audit, Executive, Compensation and Finance Committee are required to be non-employee Directors. The Board has also determined that union representative directors shall serve one year terms and rotate from the Compensation to Executive to Finance Committees. Committee Chairpersons shall serve a minimum of one year and a maximum of three year terms. Outside Directors serve a minimum of one year and a maximum of a four year term on any Committee and rotate on a staggered basis to other Committees. Current committee memberships, the number of committee meetings held during 1997 and the functions of those committees are described below. EXECUTIVE COMMITTEE. The current members of the Executive Committee are Thomas F. Meagher (chairman), Gerald L. Gitner, William M. Hoffman, Thomas H. Jacobsen, Myron Kaplan, David M. Kennedy and G. Joseph Reddington. Such Executive Committee has and may exercise the powers of the Board of Directors granted to it by the Board of Directors from time to time, except the power to amend the By-laws or the Certificate of Incorporation (except, to the extent authorized by a resolution of the whole Board (i.e., the total number of directors that the Company would have if there were no vacancies on the Board of Directors), to fix the designation, preferences and other terms of any series of preferred stock), adopt an agreement of merger or consolidation, authorize the issuance of stock, declare a dividend or recommend to the stockholders the sale, lease or exchange of all or substantially all of the Company's property and assets, a dissolution of the Company, or a revocation of a dissolution, and except as otherwise provided by the Delaware General Corporation Law. During 1997, the Executive Committee met seven times. AUDIT COMMITTEE. The current members of the Audit Committee are Thomas H. Jacobsen (chairman), David M. Kennedy, Gen. Merrill A. McPeak, Thomas F. Meagher, Blanche M. Touhill and Stephen M. 10 14 Tumblin. The Audit Committee is responsible for (i) the oversight of the Company's internal control structure, (ii) review of the internal audit department, (iii) selection of the Company's public accountants, (iv) review of the fees of the Company's outside public accountants, and (v) oversight of the Company's financial reporting. During 1997, the Audit Committee met three times. COMPENSATION COMMITTEE. The current members of the Compensation Committee are Myron Kaplan (chairman), John W. Bachmann, Eugene P. Conese, G. Joseph Reddington and Blanche M. Touhill. The Compensation Committee, administers the bonus, incentive, compensation and stock option plans of the Company and reviews and approves the salaries and other benefits of the executive officers of the Company. During 1997, the Compensation Committee met nine times. FINANCE COMMITTEE. The current members of the Finance Committee are David M. Kennedy (chairman), John W. Bachmann, William F. Compton, Eugene P. Conese, Gerald L. Gitner, Gen. Merrill A. McPeak, Thomas F. Meagher and William O'Driscoll. The Finance Committee reviews, advises, and reports to the Board on the Company's financial plans and policies and fund requirements, current and projected capital requirements, short term investment policies, borrowing and dividend policy, acquisition or disposition of aircraft, purchase or disposition of non-aircraft assets, the opening of new stations, major route changes and other similar such actions having financial implications for the Company. During 1997, the Finance Committee met four times. GOVERNANCE AND NOMINATING COMMITTEE. The current members of the Governance and Nominating Committee are G. Joseph Reddington (chairman), Gerald L. Gitner, Myron Kaplan, Thomas H. Jacobsen, Thomas F. Meagher and Stephen M. Tumblin. The Governance and Nominating Committee reviews and makes recommendations in connection with Board and Committee organization, structure and processes, including director nominee recruitment, selection, tenure, orientation, compensation, benefits and retirement; evaluates and reports on the performance of the Board, oversees officer succession planning, and reviews shareholder proposals and suggestions. The Governance and Nominating Committee met six times in 1997. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. To the best of TWA's knowledge, there was no instance in 1997 in which an executive officer of TWA served as a director or member of a compensation committee of another corporation in a situation where an executive officer of such other corporation served as a director of TWA. 11 15 EXECUTIVE COMPENSATION The following table sets forth the compensation paid by the Company for the periods indicated to (a) the individual serving as the Company's Chief Executive Officer during 1997, (b) the four most highly compensated executive officers (other than the Chief Executive Officer) who were serving as executive officers at the end of 1997 who earned more than $100,000 during 1997 and (c) such other individual who served as an executive officer during 1997 and would be included in the table except for the fact that he was not an executive officer at the end of 1997. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM --------------------------------------- COMPENSATION OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARs COMPENSATION - --------------------------- ---- ---------- ----- ------------ ------------ ------------ Gerald L. Gitner 1997 $459,477 $187,500 $ 3,941 800,000 $21,923 (Chairman and Chief Executive Officer) 1996 -- -- 34,670 4,776 -- 1995 -- -- -- -- -- William F. Compton 1997 $216,723 -- $ 2,486 350,000 $30,000 (President and Chief Operating Officer) 1996 101,939 -- 5,568 -- 13,542 1995 91,840 -- 3,303 -- 14,341 Richard P. Magurno 1997 $202,889 -- 1,712 7,763 $ 7,106 (Senior Vice President and General 1996 182,416 -- 2,712 -- 6,700 Counsel) 1995 177,360 $250,000 1,195 349,602 2,463 Michael J. Palumbo 1997 $204,386 -- $ 3,242 160,000 $11,394 (Senior Vice President and Chief 1996 144,280 -- 6,127 -- 5,300 Financial Officer) 1995 130,767 -- 4,933 20,000 1,790 Donald M. Casey 1997 $158,833 -- $ 5,159 350,000 $ 5,090 (Executive Vice President, 1996 -- -- -- -- -- Marketing) 1995 -- -- -- -- -- Roden A. Brandt 1997 $184,852 -- $20,773 -- $10,113 (Senior Vice President, Planning) 1996 59,760 -- 3,809 180,000 4,039 1995 -- -- -- -- -- Mr. Magurno resigned from the Company on January 28, 1998. Mr. Brandt resigned from the Company as an employee on December 31, 1997; he remains as a consultant through April 30, 1998. - ----------------- All compensation rounded to whole dollars. The amounts shown do not include indirect compensation, the value of which for each executive officer did not exceed the lesser of $50,000 or 10% of the aggregate compensation for such officer. The amounts shown reflect income imputed to free or reduced rate air transportation used by executive officers and eligible members of their families for purposes other than TWA business, plus withholding payments made pursuant to a tax reimbursement program established in 1986 for the benefit of active executive officers as well as certain key employees. Mr. Gitner was elected acting Chief Executive Officer on December 14, 1996 and Chairman and Chief Executive Officer on February 10, 1997. During 1996, he received compensation as a Director of the Company as described above in "Directors' Fees and Compensation" of $34,670 in fees and approximately 4,776 "phantom shares" of Common Stock in a deferred retainer account in lieu of his $20,000 retainer. The Company entered into a consulting agreement with D. G. Associates, Inc. as of December 16, 1996 for Mr. Gitner's services at the rate of $3,000 for each full working day. As a result of such agreement, D. G. Associates received $114,750 for Mr. Gitner's services between December 14, 1996 and February 12, 1997 and $3,295 for his expenses during that period. 12 16 Represents contributions to TWA's Pre-tax flexible medical plan (a) for Mr. Gitner of $958 in 1997, (b) for Mr. Compton of $565 in 1997, $86 in 1996 and $86 in 1995, (c) for Mr. Magurno of $493 in 1997, $450 in 1996 and $442 in 1995, (d) for Mr. Palumbo of $502 in 1997, $338 in 1996 and $315 in 1995, (e) for Mr. Casey of $348 in 1997 and (f) for Mr. Brandt of $462 in 1997 and $114 in 1996; premiums for group term life insurance (a) for Mr. Gitner of $11 in 1997, (b) for Mr. Compton of $188 in 1997, (c) for Mr. Palumbo of $173 in 1997 and $173 in 1996, (d) for Mr. Casey of $18 in 1997 and (e) for Mr. Brandt of $4,610 in 1997 and $1,134 in 1996; and imputed amounts and contributions for personal travel (a) for Mr. Gitner of $2,972 in 1997, (b) for Mr. Compton of $1,733 in 1997, $5,481 in 1996 and $3,217 in 1995, (c) for Mr. Magurno of $1,219 in 1997, $2,262 in 1996 and $753 in 1995 (d) for Mr. Palumbo of $2,567 in 1997, $5,616 in 1996 and $4,933 in 1995, (e) for Mr. Casey of $4,793 in 1997 and (f) for Mr. Brandt of $15,701 in 1997 and $2,561 in 1996. Represents the grant of options to purchase shares of Common Stock under the Company's Key Employee Stock Incentive Plan ("KESIP"). Represents the Company's contributions to the deferred contribution plans in which a named officer participates. Also includes, for Mr. Compton in 1995, trip expense payments of $899 and Equity Rights earnings of $3,161; for Mr. Palumbo in 1997, relocation expenses reimbursed of $4,233; and for Mr. Brandt relocation expenses reimbursed of $3,639 in 1997 and $1,750 in 1996. Represents payments to Mr. Magurno pursuant to the Company's Restructuring Incentive Compensation Plan in connection with the completion of the Company's 1995 reorganization.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF PERCENT OF ANNUAL RATES OF SECURITIES TOTAL STOCK PRICE APPRECIATION UNDERLYING OPTIONS GRANTED FOR OPTION TERM OPTIONS GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION ------------------------ NAME (#) FISCAL YEAR PRICE DATE 5% 10% - ---- --------------- --------------- -------- ---------- ---------- ---------- Gerald L. Gitner.................... 800,000 39.5% $5.84 02/12/04 $1,299,400 $2,598,800 William F. Compton.................. 200,000 9.9% $7.09 03/27/05 $ 495,591 $ 991,182 150,000 7.4% $8.50 12/03/05 $ 445,613 $ 891,226 Richard P. Magurno.................. 7,763 0.4% $6.47 10/14/98 $ 2,511 $ 5,022 Michael J. Palumbo.................. 160,000 7.9% $6.65 01/13/04 $ 318,668 $ 637,336 Donald M. Casey..................... 350,000 17.3% $7.78 05/29/05 $ 919,013 $1,838,026 Roden A Brandt...................... -- -- -- -- -- -- - ------------- All options granted under the KESIP. Options generally vest at a rate of 34% upon the first anniversary of the award date, 33% upon the second anniversary of the award date and 33% upon the third anniversary of the award date. Options generally expire 5 years from vesting. The date shown is the expiration date for the last of these options.
13 17 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
VALUE OF UNEXERCISED NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT UNDERLYING YEAR-END SHARES ACQUIRED VALUE UNEXERCISED OPTIONS EXERCISABLE/ NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE UNEXERCISABLE - ---- --------------- -------- ------------------------- ----------------------- Gerald L. Gitner -- -- 500,000 $2,142,500 (Chairman and 300,000 $1,285,000 Chief Executive Officer) William F. Compton -- -- -- -- (President and Chief 350,000 $ 850,750 Operating Officer) Richard P. Magurno -- -- 357,365 $1,945,941 (Senior Vice President and -- -- General Counsel) Michael J. Palumbo -- -- 67,800 $ 262,539 (Senior Vice President and 112,200 $ 403,161 Chief Financial Officer) Donald M. Casey -- -- -- -- (Executive Vice President; 350,000 $ 820,750 Marketing) Roden A. Brandt -- -- 120,600 $ 0 (Senior Vice President, -- -- Planning) - ------------- Based on the average of the high and low price on the American Stock Exchange on December 31, 1997 of $10.125.
CERTAIN EMPLOYMENT AGREEMENTS A Consulting Agreement between D.G. Associates, Inc. and TWA was entered into as of December 16, 1996 regarding the services of Gerald L. Gitner as Acting Chief Executive Officer. TWA agreed to pay $3,000 for each full working day for such consulting services. The agreement terminated upon Mr. Gitner's election as Chairman and Chief Executive Officer on February 12, 1997. From December 14, 1996 through February 12, 1997, D.G. Associates Inc. received $114,750 from TWA for Mr. Gitner's services and $3,295 for his expenses. An Employment Agreement with Mr. Gitner was entered into as of February 12, 1997. The terms of the agreement include (a) an annual salary of $500,000 (b) the grant on February 12, 1997 of 800,000 stock options at an exercise price of $5.84, 500,000 of which were immediately vested, 150,000 of which vested on the first anniversary of the date of the agreement and 150,000 of which vest on the second anniversary of the date of the agreement; (c) the grant of 200,000 additional stock options as of February 12, 1998, (50% of such additional options vesting upon the first anniversary of the date of grant and 50% as of the second anniversary of the date of grant); (d) make-whole payments (for reducing his availability as Chairman of Avalon Group Ltd.) of $62,500 per quarter during the first year of employment at TWA (notwithstanding any termination of such employment) and payments of $20,834 per month in the second year of employment (such monthly payments to terminate upon any termination of employment); (e) the potential for a $250,000 annual incentive cash bonus based on measures of performance improvement (such as, meeting business plan, cost per available seat mile, revenue per available seat mile and cash flow); (f) thirty days prior written notice for termination without cause and the payment of $250,000 in the event of such termination, which payment shall be offset by the realizable value (the 14 18 difference between the Option Exercise Price and the closing market price of the stock) of any vested stock option; (g) a "Change in Control" agreement; (h) other standard executive officer benefits such as vacation, medical/dental and flight privileges; and (i) that Mr. Gitner may continue to serve as Executive Chairman of Avalon Group, Ltd. and in various other positions with its affiliates, successors and/or assigns, provided that no such service may interfere with his obligations to perform full-time services for TWA under the agreement. A Consulting Agreement between David M. Kennedy and TWA was entered into as of December 16, 1996 regarding Mr. Kennedy's election as Acting Executive Vice President and Chief Operating Officer. TWA agreed to pay Mr. Kennedy at the rate of $2,725 for each full working day. The Agreement was terminated on June 4, 1997. From December 14, 1996 through its termination, Mr. Kennedy received $259,615 from TWA for his services pursuant to the agreement and $13,477 for his expenses. A new Consulting Agreement was entered into as of June 6, 1997 between Mr. Kennedy and the Company whereby Mr. Kennedy will receive $25,000 per quarter, payable in arrears for his services. This agreement may be terminated by either Mr. Kennedy or the Company on one month's notice. A Consulting Agreement between William F. Compton and TWA was entered into as of December 16, 1996 regarding Mr. Compton's election as Acting Executive Vice President--Operations. Mr. Compton agreed to serve at his then current rate of pay as a Company employee. Mr. Compton agreed that he would not divulge or communicate any confidential information which he obtained as an officer of the Company other than as specified in the agreement. The Board, in approving the agreement stated that, in connection with any services performed by Mr. Compton under the agreement, Mr. Compton would not supervise personnel in day-to-day labor relations matters and would not become involved in the Company's labor negotiation strategies and would not supervise any Company employee whose primary responsibility is the administration and interpretation of the Company's labor contracts. At the time, Mr. Compton was still the ALPA-designated director. The agreement terminated upon his election as Executive Vice President--Operations on March 27, 1997. As of that date, Mr. Compton received a salary of $225,000. Mr. Compton also received 200,000 options pursuant to the KESIP exercisable at a price of $7.09, 34% vesting on the first anniversary of the grant, 33% on the second anniversary and 33% on the third anniversary. Upon his election as President and Chief Operating Officer on December 3, 1997, he received an additional 150,000 options at an exercise price of $8.50, with the same vesting schedule. Mr. Compton serves as an officer of the Company at the pleasure of the Board of Directors. A letter agreement dated as of October 1, 1996 was executed by TWA and Richard P. Magurno. The agreement provided for Mr. Magurno's continued employment at his then current salary subject to review and adjustment from time to time. Mr. Magurno resigned on January 28, 1998. Pursuant to a severance agreement, he will receive his salary through April 12, 1999. A letter agreement dated as of October 1, 1996 was executed by TWA and Michael J. Palumbo. The agreement provides for Mr. Palumbo's continued employment at his then current salary subject to review and adjustment from time to time. In 1997 Mr. Palumbo received 160,000 options at an exercise price of $6.65, 54,400 of which were immediately vested, 52,800 vesting in January, 1998 and 52,800 in January 1999. Mr. Palumbo serves as an officer of the Company at the pleasure of the Board of Directors, subject to TWA's right of termination without cause with one year's salary. A letter agreement dated as of May 29, 1997 was executed by TWA and Donald M. Casey. The agreement provides for Mr. Casey's employment at an annual salary of $250,000, subject to review and adjustment from time to time. The agreement also provides for the grant of 350,000 options (exercise price of $7.78), with 34% vesting on the first anniversary of the grant, 33% on the second anniversary and 33% on the third anniversary. Mr. Casey serves as an officer of the Company at the pleasure of the Board of Directors, subject to TWA's right of termination without cause with payment of $250,000. 15 19 Pursuant to a severance agreement dated as of February 12, 1998, Roden A. Brandt will be paid his salary through December 31, 1998 and will be vested in 120,600 stock options with an exercise price of $12.31. The options expire on May 30, 1998, but may be extended by the Company under certain circumstances. Each executive officer has signed a Change in Control Agreement which provides, inter alia, that if the named executive is terminated upon a change in control, he or she will receive two years' salary. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tables set forth, as of March 26, 1998, certain information concerning ownership of each class of voting securities of the Company by: (i) each person who is known by the Company to own beneficially more than 5% of the voting securities of the Company, (ii) each current director individually, (iii) the chief executive officer and the five other senior executive officers and (iv) all current directors and executive officers of the Company as a group. The determinations of "beneficial ownership" of voting securities are based upon Rule 13d-3 under the Exchange Act. Such rule provides that the securities will be deemed "beneficially owned" where a person has, either solely or in conjunction with others, the power to vote or to direct the voting of securities and/or the power to dispose, or to direct the disposition of, the securities or where a person has the right to acquire any such power within 60 days after the date such "beneficial ownership" is determined. Except as described below, each of the persons and groups listed below has sole voting and investment power with respect to the securities shown. PRINCIPAL HOLDERS OF COMMON STOCK (a) Security Ownership of Beneficial Owners holding more than 5% of the Common Stock
NUMBER OF PERCENT OF SHARES OF OUTSTANDING COMMON STOCK VOTING NAME AND ADDRESS OF BENEFICIAL OWNER OWNED SECURITIES ------------------------------------ ------------ ----------- Nicholas-Appelgate Capital Management...................................... 4,067,900 7.0% TCW Group, Inc. and Robert Day............................................. 2,780,400 5.0% - ------------- The address of Nicholas-Appelgate Management is 600 West Broadway, 29th Floor, San Diego, CA 92101. Nicholas-Appelgate Capital Management has sole voting power of 3,143,800 of such shares. TCW Group, Inc.'s address is 865 South Figueroa Street, Los Angeles, CA 90017 and Robert Day's address is 200 Park Avenue, Suite 2200, New York, NY 10166. Robert Day controls the TCW Group, Inc. TCW Group, Inc. has sole voting control over 130,400 shares of Common Stock and Robert Day has sole voting control over 2,780,400 shares of Common Stock.
16 20 (b) Security Ownership of Current Directors and Current Officers
PERCENT OF AMOUNT OF OUTSTANDING BENEFICIAL VOTING NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNERSHIP SECURITIES - --------------------------------------------- ------------- -------------- John W. Bachmann................................ 5,921 William F. Compton............................. 68,932 Eugene P. Conese....................... 12,185 Gerald L. Gitner.......................... 657,776 1.1% William M. Hoffman..................................... 319 Edgar M. House.......................................... 0 Thomas H. Jacobsen......................... 10,185 Myron Kaplan..................... 11,736 David M. Kennedy.................................... 3,012 Merrill A. McPeak....................................... 1,514 Thomas F. Meagher................... 13,673 William O'Driscoll..................................... 162,717 G. Joseph Reddington............. 12,236 Blanche M. Touhill.................................. 3,012 Stephen M. Tumblin...................................... 1,000 Donald M. Casey........................................ 2,500 Michael J. Palumbo........................... 853,814 1.5% James F. Martin........................................ 0 Kathleen A. Soled............................ 19,628 Total Shares owned by Current Directors and Current Executive Officers, as a group (19 individuals) 1,840,160 3.1% - ------------- Less than 1% Includes securities issuable pursuant to options exercisable within 60 days. Pursuant to the Company's 1995 Outside Directors' Stock Ownership and Stock Option Plan (the "Outside Directors Plan"), each outside director may elect to defer some or all of his or her annual retainer by participating in a Deferred Retainer Program (as defined in the Outside Directors Plan). Participating directors are entitled to receive annual credits to their deferred retainer accounts equaling the percentage of his or her retainer to be received in shares of Common Stock times the annual retainer amount payable to such outside director divided by (i) with respect to 1996, $4.1875, the subscription price of the Company's September 1995 equity rights offering (the "Subscription Price"), (ii) with respect to 1997, $6.875, the fair market value of the Common Stock on January 2, 1997 and (iii) with respect to 1998, $9.94, the fair market value of the Common Stock on January 2, 1998. Upon the earlier to occur of December 31, 2000 and the last date of a participating director's service on the Board, such director is entitled to a payment equal to (i) the total number of shares of Common Stock in the director's deferred retainer account, (ii) cash equaling the number of shares of Common Stock contained in the deferred retainer account times the Fair Market Value (as defined in the Outside Directors Plan) of the Common Stock on the date the retainer becomes payable or (iii) a combination of (i) and (ii). 17 21 Messrs. Bachmann, Kaplan and Reddington each elected to defer 50% of 1997 retainer amounts payable to them in a deferred retainer account. Constitutes or includes 1,455 shares of Common Stock issuable to such outside director pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days assuming such director elects to receive the entire balance of his deferred retainer account in shares of Common Stock. Messrs. Bachmann and Kennedy and Ms. Touhill each elected to defer all 1998 retainer amounts payable to them in a deferred retainer account. Constitutes or includes 2,012 shares of Common Stock issuable to such outside director pursuant to the Outside Directors Plan in the event of his or her termination from service on the Board within 60 days assuming such director elects to receive the entire balance of his deferred retainer account in shares of Common Stock. Excludes approximately 931 shares of Employee Preferred Stock attributable to Mr. Compton's beneficial interest in the TWA Air Line Pilots Supplemental Stock Plan. Excludes shares owned by his wife pursuant to her beneficial interest in the IAM Trans World Airlines Employees' Stock Ownership Plan for Flight Attendants (the "Flight Attendant Trust") and other shares as to which she is the record holder. Mr. Compton disclaims beneficial ownership of all shares held by his wife. Mr. Compton is the record holder of 932 shares of Common Stock. Includes 68,000 shares of Common Stock issuable upon the exercise of options granted to Mr. Compton pursuant to the KESIP and which will vest within 60 days. Messrs. Conese, Gitner, Jacobsen, Kaplan, and Reddington each elected to defer all 1996 retainer amounts payable to them in a deferred retainer account. Constitutes or includes 4,776 shares of Common Stock issuable to such outside director pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days, assuming such director elects to receive the entire balance of his deferred retainer account in shares of Common Stock. Messrs. Conese and Jacobsen each elected to defer all 1997 retainer amounts payable to them in a deferred retainer account. Constitutes or includes 2,909 shares of Common Stock issuable to such outside director pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days, assuming such director elects to receive the entire balance of his deferred retainer account in shares of Common Stock. Includes warrants to purchase 49 shares of Common Stock at a price of $14.40 per share. Includes 1,500 options granted pursuant to the Outside Directors Plan for Messrs. Conese, Jacobsen, Kaplan, Meagher and Reddington. Includes 650,000 shares of Common Stock issuable upon the exercise of vested options granted to Mr. Gitner pursuant to the KESIP. Includes approximately 16 shares of Common Stock held for Mr. Hoffman's benefit as a TWA employee in the Flight Attendant Trust and warrants to purchase 8 shares of Common Stock at a price of $14.40 per share. Mr. Hoffman is also the beneficial owner of an undetermined amount of Common Stock which has not yet been issued or allocated, which is to be distributed to Mr. Hoffman as a TWA employee as a result of IFFA litigation against TWA settled in the course of the '93 Reorganization. Mr. Hoffman is the record holder of 295 shares of Common Stock. Messrs. Kaplan and Reddington each elected to defer 50% of their 1998 retainer amounts payable to them in a deferred retainer account. Constitutes or includes 1,006 shares of Common Stock issuable to such outside director pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days assuming such director elects to receive the entire balance of his deferred retainer account in shares of Common Stock. 18 22 These shares are held by Mr. Kaplan for the benefit of the firm of Kleinberg, Kaplan, Wolff & Cohen, P.C., of which Mr. Kaplan is a member. Pursuant to the Outside Directors Plan, such outside director was granted the right to purchase up to 3,000 shares of Common Stock at the Subscription Price. Includes 3,000 shares of Common Stock issuable upon exercise of this right. Mr. Meagher elected to defer all 1996 retainer amounts payable to him in a deferred retainer account. Constitutes 7,164 shares of Common Stock issuable to Mr. Meagher pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days, assuming Mr. Meagher elects to receive the entire balance of his deferred retainer account in shares of Common Stock. Mr. Meagher elected to defer all 1998 retainer amounts payable to him in a deferred retainer account. Constitutes 1,509 shares of Common Stock issuable to Mr. Meagher pursuant to the Outside Directors Plan in the event of his termination from service on the Board within 60 days, assuming Mr. Meagher elects to receive the entire balance of his deferred retainer account in shares of Common Stock. 125,402 shares of Common Stock are held by Mr. O'Driscoll as a member of the IAM Plan Trust Committee of the IAM Trans World Airlines Employees' Stock Ownership Plan (the "IAM Trust"), along with Mr. Gary Poos. 37,315 shares of Common Stock are held by Mr. O'Driscoll as a member of the Trustee Committee of the Flight Attendant Trust, along with Sherry Cooper and Rocky Miller. Mr. O'Driscoll disclaims beneficial ownership of the shares held by the IAM Trust and the Flight Attendant Trust. Does not include unvested options to purchase shares of Common Stock pursuant to the KESIP. Approximately 1,298 and 1,128 shares attributable to the respective beneficial interests of Mr. Palumbo and Ms. Soled are held by the employee stock ownership trust established for the benefit of TWA's non- contract employees (the "Non-Contract Employees Trust"). Except for such shares, Mr. Palumbo, Ms. Soled and Mr. Martin disclaim beneficial ownership of the shares held by the Non-Contract Employees Trust. Mr. Palumbo, Ms. Soled and Mr. Martin serve as members of the committee having the power to direct the vote of the shares of Common Stock held in the Non-Contract Employees Trust, Ms. Soled and Mr. Martin having been appointed trustees on March 31, 1998. Such trust holds 731,916 shares. Includes 120,600 shares of Common Stock issuable upon the exercise of vested options granted to Mr. Palumbo pursuant to the KESIP. Includes 18,500 shares of Common Stock issuable upon the exercise of vested options granted to Ms. Soled pursuant to the KESIP. When combined with shares of Employee Preferred Stock beneficially held by current directors and current executive officers, as a group, represents a total of 5,994,811 shares of the Company's Voting Stock.
19 23 PRINCIPAL HOLDERS OF EMPLOYEE PREFERRED STOCK
SERIES OF AMOUNT OF PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER EMPLOYEE BENEFICIAL OUTSTANDING OR IDENTITY OF GROUP PREFERRED STOCK OWNERSHIP SHARES OF SERIES - ------------------------------------ --------------- ---------- ---------------- TWA Air Line Pilots Supplemental Stock Plan, Joseph A. Chronic, Howard L. Coldwell, Jr. and Scott Schwartz as trustees ALPA Preferred Stock 986,064 52.9% TWA Air Line Pilots 1995 Employee Stock Ownership Plan, American Stock Transfer & Trust Company, Trustee ALPA Preferred Stock 879,428 47.1% IAM Trust IAM Preferred Stock 3,191,759 100% Flight Attendant Trust Flight Attendant Preferred Stock 962,892 100% William O'Driscoll IAM and Flight Attendant Preferred Stock 4,154,651 100% - ------------- The address of the ALPA Trust is c/o Joseph A. Chronic, as co-trustee, TWA Air Line Pilots Supplemental Stock Plan, 3221 McKelvey Road, Suite 200, Bridgeton, Missouri 63044. Constitutes 1.7% of the securities entitled to vote on all agenda matters at meetings of stockholders other than the election of directors. The address of the TWA Air Line Pilots 1995 Employee Stock Ownership Plan is c/o American Stock Transfer & Trust Company, as trustee ("AST"), 40 Wall Street, 46th Floor, New York, New York 10005. Constitutes 1.5% of the securities entitled to vote on all agenda items at meetings of stockholders other than the election of directors. The address of the IAM Trust is c/o Fleet National Bank, N.A., as trustee, One Federal Street, 31st Floor, Boston, Massachusetts 02211. When combined with the 125,402 shares of Common Stock held by the IAM Trust, constitutes 5.7% of the securities entitled to vote on all agenda matters at meetings of stockholders other than the election of directors. The address of the Flight Attendant Trust is c/o AST, at the address set forth in footnote 3. When combined with the 37,315 shares of Common Stock held by the Flight Attendant Trust, constitutes 1.7% of the securities entitled to vote on all agenda matters at meetings of stockholders other than the election of directors. The address of Mr. O'Driscoll is c/o Fleet National Bank, N.A., as trustee, One Federal Street, 31st Floor, Boston, Massachusetts 02211. Includes all shares of IAM Preferred Stock held by the IAM Trust and all shares of the Flight Attendant Preferred Stock held by the Flight Attendant Trust. Mr. O'Driscoll disclaims beneficial ownership of the shares of IAM Preferred Stock held by the IAM Trust and all shares of the Flight Attendant Preferred Stock held by the Flight Attendant Trust.
20 24 COMPENSATION PURSUANT TO PENSION PLANS Retirement Plans. The TWA Retirement Pension Plan ("TWA Retirement Plan") applicable to United States salaried employees was non-contributory. The TWA Retirement Plan was assumed by Pichin Corp. and "frozen" effective January 1, 1993 and, accordingly, participants thereunder will not accrue additional retirement benefits after such date. Participation in such plan is closed to new employees. The following tables show the estimated annual retirement benefits payable at the normal retirement age of 65 to TWA Retirement Plan participants with the years of service and earnings classifications indicated, assuming payment in the form of a single life annuity. The first table covers participants who were hired by TWA prior to January 1, 1985. The payments shown in such tables are subject to reduction by a percentage of the estimated social security benefit and by the effect of excluding compensation over $228,860. ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE TO PLAN PARTICIPANTS HIRED BEFORE JANUARY 1, 1985
YEARS OF SERVICE ---------------------------------------------------------------------------- REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS - ------------ -------- -------- -------- -------- -------- $125,000 $ 30,938 $ 41,250 $ 51,563 $ 61,875 $ 72,188 150,000 37,125 49,500 61,875 74,250 86,625 175,000 43,313 57,750 72,188 86,625 101,063 200,000 49,500 66,000 82,500 99,000 115,500 225,000 55,688 74,250 92,813 111,375 129,438 250,000 61,875 82,500 103,125 123,750 114,375 275,000 68,063 90,750 113,438 136,125 158,813 300,000 74,250 99,000 123,750 148,500 173,250 325,000 80,438 107,250 134,063 160,875 187,688 350,000 86,625 115,500 144,375 173,250 202,125 375,000 92,813 123,750 154,688 185,625 216,563 400,000 99,000 132,000 165,000 198,000 231,000 425,000 105,188 140,250 175,313 210,375 245,438 450,000 111,375 148,500 185,625 222,750 259,875 475,000 117,563 156,750 195,938 235,125 274,313 500,000 123,750 165,000 206,250 247,500 288,750
21 25 ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE TO PLAN PARTICIPANTS HIRED ON OR AFTER JANUARY 1, 1985
YEARS OF SERVICE ---------------------------------------------------------------------------- REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS - ------------ -------- -------- -------- -------- -------- $125,000 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625 150,000 33,750 45,000 56,250 67,500 78,750 175,000 39,375 52,500 65,625 78,750 91,875 200,000 45,000 60,000 75,000 90,000 105,000 225,000 50,625 67,500 84,375 101,250 118,125 250,000 56,250 75,000 93,750 112,500 131,250 275,000 61,875 82,500 103,125 123,750 144,375 300,000 67,500 90,000 112,500 135,000 157,500 325,000 73,125 97,500 121,875 146,250 170,625 350,000 78,750 105,000 131,250 157,500 183,750 375,000 84,375 112,500 140,625 168,750 196,875 400,000 90,000 120,000 150,000 180,000 210,000 425,000 95,625 127,500 159,375 191,250 223,125 450,000 101,250 135,000 168,750 202,500 236,250 475,000 106,875 142,500 178,125 213,750 249,375 500,000 112,500 150,000 187,500 225,000 262,500
Earnings covered by this plan consist of total compensation before withholding deductions, excluding overtime, premium pay, special allowances and contributions to this or any other qualified benefit plan. Effective January 1, 1992, any compensation in excess of $228,860 per year will not be used in computing a member's retirement benefit under the plan. A member's retirement income at the normal retirement age, which is 65, is calculated as the greater of (i) a percentage of final average monthly earnings (not taking into account earnings after December 31, 1988), less a percentage of estimated social security benefits, times year of plan service (as defined) or (ii) the accrued benefit under the plan formula in effect immediately prior to March 1, 1986. The retirement benefits will be reduced by the amounts of any retirement benefits received by participants under provisions of TWA's retirement plans applicable to the various union groups with respect to the same periods of service. As permitted by the Employee Retirement Income Security Act of 1974, as amended, the TWA Retirement Plan applicable to salaried employees provides for the payment out of general funds of TWA of any benefit calculated under provisions of the applicable retirement plan that may be above the annual maximum benefit limit under the U.S. Internal Revenue Code of 1986, as amended (the "Code"). The annual limit as of December 31, 1992 was $112,221 at age 65, except that for those plan members whose accrued benefits exceeded $90,000 prior to December 31, 1983 the annual limit will be equal to the 1982 accrued benefit. The TWA Retirement Plan provides that members vest fully in their benefits upon the completion of five years of service. The TWA Retirement Plan was frozen effective January 1, 1993, and as such there have been no additional accruals after such date. No current executive officer of the Company was vested in the TWA Retirement Plan on that date. 22 26 COMPENSATION COMMITTEE REPORT Historically, the Company's policy regarding compensation for its executive officers has been based on consideration of a variety of factors and the exercise of the collective judgment of the Board of Directors. The Chief Executive Officer has typically proposed to the Board of Directors the amount and type of compensation for such officers. Factors considered by the CEO and the Board of Directors in making recommendations and decisions with regard to compensation included their subjective perception of an individual officer's performance, significant milestones achieved by the officer and the Company, gross margins, the nature of an officer's duties and responsibilities, the compensation paid to officers of companies competing with the Company (to the extent known) and a subjective assessment of the compensation the Company's officers could obtain in the market. Prior to 1997 compensation had not been formally tied to pre-established, fixed objective measures of Company performance, nor was any objective rank or weight attributed to specific measures of performance in setting compensation. However, the Compensation Committee, beginning in January of 1997, has reviewed management objectives and has, from time to time, retained the services of executive compensation experts such as Towers Perrin to benchmark management compensation versus the airline industry and other companies similarly situated. The Compensation Committee has, and is continuing, to work with Towers Perrin and management to develop a comprehensive management compensation and incentive plan that will tie executive compensation to established goals of the Company to more closely align the interests of executive officers to those of employees and shareholders and to assist the Company in attracting and maintaining talented management personnel. As previously discussed herein, Mr. Gitner's employment agreement provides for the potential for an annual incentive cash bonus of up to $250,000 based upon the attainment by the Company during the calendar year of five objective measures of performance improvement, for example, meeting business plan, cost per available seat mile, revenue per available seat mile, operating performance and cash flow. If the objectives are not achieved in any calendar year, no bonus will be paid. Bonus payments are made on a pro rata basis, i.e. 20% for each objective reached. At its meeting in January 1998, the Compensation Committee agreed that three of the objectives had been met for 1997 and authorized payment of a pro rata portion of the bonus. The KESIP was approved by the requisite vote of the Company's stockholders in November, 1995 and provided for the award of incentive and nonqualified stock options for up to 7% of the Company's Common Stock and Employee Preferred Stock as of December, 1995. In December, 1996, the Compensation Committee recommend amending the KESIP (which amendment was adopted by the Board of Directors) to provide the amount of options available under the KESIP to be adjusted to 7% of the Company's Common Stock and Employee Preferred Stock outstanding at the start of each fiscal year. Based on a report of Towers, Perrin and input from others including executive search firms, comparing industry-wide stock option plans and the need to have options available to attract qualified senior management candidates, the KESIP was further amended on March 27, 1997, to provide the amount of options available to be adjusted to 14% of the Company's Common Stock and Employee Preferred Stock outstanding at the start of each fiscal year. The purpose of the KESIP is to promote the success and enhance the value of the Company by linking the personal interests of participants to those of the Company's stockholders and by providing the participants with an incentive for outstanding performance. Section 162(m) of the Code ("Section 162(m)"), generally limits the Company's deduction to $1 million per year per executive for certain compensation paid to each of its CEO and the four highest compensated executives other than the CEO named in the applicable proxy statement (the "covered executives"). The Code and current regulations issued under the Code contain exclusions from this limitation. In general, the regulations exclude from this limitation compensation that is calculated based on "objective" performance criteria (as defined). The regulations do not exclude from this limitation compensation that is calculated based on achievement of range of quantitative and qualitative criteria with full discretion by the Committee to evaluate 23 27 performance. The limitations of Section 162(m) were not applicable to compensation paid by the Company to covered executives during 1997. The members of the Compensation Committee in January, 1997 were: Myron Kaplan, Chairman, John W. Bachmann, Eugene P. Conese, Jewel Lafontant-Mankarious, William Hoffman and G. Joseph Reddington. Subsequent to the May 28, 1997 meeting, the Committee was reorganized to consist of: Myron Kaplan, Chairman, John W. Bachmann, Eugene P. Conese, G. Joseph Reddington, Blanche M. Touhill and William W. Winpisinger. The following individuals were members of the Compensation Committee during some part of 1997 or are currently on the Compensation Committee: John W. Bachmann Eugene P. Conese William M. Hoffman Thomas H. Jacobsen Myron Kaplan Jewel Lafontant-Mankarious G. Joseph Reddington Blanche M. Touhill William W. Winpisinger 24 28 PERFORMANCE GRAPH The following graph compares the percentage change in the Company's cumulative total security holder return on its Common Stock with the cumulative total return, assuming reinvestment of dividends, of (i) the Standard & Poor's 500 Stock Index and (ii) the Standard & Poor's Airlines Group Index. The initial price point for the Common Stock was calculated using the opening price of $5.00 per share of Common Stock, traded on an "as issued" basis, on the American Stock Exchange as furnished to the Company by such exchange. The Common Stock was first issued on August 23, 1995. [PERFORMANCE GRAPH]
8/23/95 12/31/95 12/31/96 12/31/97 TRANS WORLD AIRLINES 100 207.50 131.26 201.25 S&P 500 INDEX 100 110.08 132.39 173.44 AIRLINES 100 95.96 105.08 176.69
25 29 AGENDA ITEM TWO RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS KPMG Peat Marwick LLP, independent auditors, were the auditors of the Company during the fiscal year ending December 31, 1997 and also have been selected by the Board of Directors to serve as auditors for the fiscal year ending December 31, 1998. The Board of Directors recommends to the stockholders their ratification of its selection of KPMG Peat Marwick LLP to audit the accounts of the Company and its subsidiaries for 1998. Accordingly, the following resolution will be offered at the Meeting: RESOLVED, that the appointment by the Board of Directors of KPMG Peat Marwick LLP, independent auditors, to audit the accounts of the Company and its subsidiaries for 1998 be, and hereby is, ratified and approved. In the event the holders of Voting Stock fail to ratify the appointment, the Board of Directors will consider it a direction to select other auditors for the subsequent year. Even if the selection is ratified, the Board of Directors, in its discretion, may direct the appointment of a new independent accounting firm at any time during the year if the Board feels that such change would be in the best interests of the Company and its stockholders. The firm (as principal accountant for the current year and also the most recently completed fiscal year) will be represented at the Meeting and representatives will have the opportunity to make a statement, if they so desire, and also will be available to respond to appropriate questions. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder require the Company's officers and directors and persons who own more than 10% of the Company's Common Stock to file reports of ownership and changes in the ownership with the SEC and to furnish the Company with copies. Based upon its review of the copies of such forms received by it or written representation from certain reporting persons, the Company believes that during the last fiscal year all filing requirements applicable to its officers, directors, and greater than 10% beneficial owners were complied with. AVAILABILITY OF ANNUAL REPORT TO STOCKHOLDERS AND REPORT ON FORM 10-K Copies of the Company's Annual Report to Stockholders for the year ended December 31, 1997, which includes certain financial information about the Company, are currently being mailed, together with this Proxy Statement to the Company's stockholders. ADDITIONAL COPIES OF SUCH ANNUAL REPORT ALONG WITH COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 AS FILED WITH THE SEC (EXCLUSIVE OF EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE), ARE AVAILABLE TO STOCKHOLDERS WHO MAKE WRITTEN REQUEST THEREFOR ADDRESSED TO: CORPORATE SECRETARY, ONE CITY CENTRE, 18TH FLOOR, 515 N. SIXTH STREET, ST. LOUIS, MISSOURI 63101. COPIES OF THE ANNUAL REPORT ON FORM 10-K ARE AVAILABLE WITHOUT CHARGE. COPIES OF EXHIBITS AND BASIC DOCUMENTS FILED WITH THE ANNUAL REPORT ON FORM 10-K OR REFERENCED THEREIN WILL BE FURNISHED TO STOCKHOLDERS UPON WRITTEN REQUEST AND PAYMENT OF THE COMPANY'S EXPENSES IN FURNISHING SUCH DOCUMENTS. 26 30 OTHER MATTERS Management does not intend to present to the Meeting any business other than the items stated in the "Notice of Meeting of Stockholders" and does not know of any matters to be brought before the Meeting other than those referred to above. If, however, any other matters properly come before the Meeting, the persons designated as proxies will vote on each such matter in accordance with their best judgment. Whether or not you expect to be at the Meeting in person, please sign, date and return promptly the enclosed proxy. No postage is necessary if the proxy is mailed in the United States. STOCKHOLDER PROPOSALS If the proxy statement relating to next year's annual meeting is released to the Company's security holders on the anniversary of the date on which this Proxy Statement and Form of Proxy are so released, any proposal to be presented at next year's annual meeting must be received at the principal executive offices of the Company not later than December 21, 1998. Any such proposals should be directed to the attention of the Corporate Secretary for consideration for inclusion in the Company's proxy statement and form of proxy relating to the next annual meeting. Any such proposals must comply in all respects with the rules and regulations of the SEC and it is suggested that proponents of any proposals submit such proposals to the Company sufficiently in advance of the deadline by Certified Mail-Return Receipt Requested. 27 31 TRANS WORLD AIRLINES, INC. THIS PROXY/INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE THE BOARD OF DIRECTORS The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 15, 1998, and does hereby appoint Thomas H. Jacobsen and Thomas F. Meagher, and each of them, with full power of substitution as proxies and attorneys-in-fact on behalf and in the name of the undersigned to represent the undersigned and to vote all shares of Trans World Airlines, Inc. Common Stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of Trans World Airlines, Inc. to be held at the Norfolk Airport Hilton, 1500 North Military Highway at North Hampton Boulevard, Norfolk, Virginia 23502, at 10:00 a.m. local time, on May 19, 1998, and at any adjournment(s) thereof. 1. PROPOSAL 1: Election of Class I and II Directors FOR all nominees listed below WITHHOLD AUTHORITY to vote (except as marked to the contrary below) for all nominees listed below / / / / NOMINEES: John W. Bachmann, William F. Compton, Eugene P. Conese, Gerald L. Gitner, Myron Kaplan, Gen. Merrill A. McPeak and Blanche M. Touhill. (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.) 2. PROPOSAL 2: Ratification of KPMG Peat Marwick LLP as Independent Accountants FOR AGAINST ABSTAIN / / / / / / PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY This proxy/instruction card, when properly executed, will be voted in accordance with the directions given by the undersigned stockholder. If no direction is made, it will be voted in favor of Proposals 1 and 2. Shares Common Stock ---------- Date: , 1998 PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON, AND WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, GIVE YOUR FULL TITLE AS SUCH. IF THE SIGNATORY IS A CORPORATION, SIGN THE FULL CORPORATION NAME BY A DULY AUTHORIZED OFFICER. 32 Appendix Page 25 of the printed Proxy contains a Stock Performance Graph. The information contained in the graph is depicted in the table that follows the graph. -----END PRIVACY-ENHANCED MESSAGE-----