US Airways 2006 Annual Report Download - page 127

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
In the second quarter of 2006, US Airways Group received $2.8 million of proceeds related to the issuance of 386,925 shares of
common stock that were issued pursuant to a warrant exercise. As of December 31, 2006, there were no warrants outstanding.
17. Stock-based compensation
Prior to January 1, 2006, the Company accounted for stock-based compensation plans in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations. Effective January 1, 2006,
the Company adopted SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"), using the modified prospective transition method.
Under the modified prospective transition method, compensation cost is recognized in the financial statements beginning with the
effective date based on the requirements of SFAS 123R for all share-based payments granted after that date, and based on the
requirements of SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") for all unvested awards granted prior to the
effective date of SFAS 123R. Results for prior periods are not restated using the modified prospective transition method.
Substantially all of America West Holdings and AWA employee stock options outstanding at the time of the merger were fully
vested in accordance with the change of control provisions of America West Holdings' stock option plans and were converted into
options of US Airways Group. Existing stock options of US Airways Group outstanding prior to the merger on September 27, 2005 were
cancelled as part of the plan of reorganization. Accordingly, as of January 1, 2006, only unvested stock options, stock appreciation rights
and restricted stock units granted subsequent to and in connection with the merger are subject to the transition provisions of SFAS 123R.
As part of the plan of reorganization, the Bankruptcy Court approved a new equity incentive plan, referred to as the 2005 Incentive
Equity Plan (the "2005 Incentive Plan"). The 2005 Incentive Plan provides for the grant of incentive stock options, nonstatutory stock
options, stock appreciation rights, stock purchase awards, stock bonus awards, stock unit awards, and other forms of equity
compensation, collectively referred to as stock awards, as well as performance-based cash awards. Incentive stock options granted under
the 2005 Incentive Plan are intended to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended. Nonstatutory stock options granted under the 2005 Incentive Plan are not intended to qualify as incentive
stock options under the Internal Revenue Code.
A maximum of 12.5% of the fully-diluted shares (as of the completion of the merger) of US Airways Group common stock is
available for issuance under the 2005 Incentive Plan, totaling 10,969,191 shares. Any or all of these shares may be granted pursuant to
incentive stock options. Shares of US Airways Group common stock issued under the 2005 Incentive Plan may be unissued shares or
reacquired shares, purchased on the open market or otherwise. At December 31, 2006, approximately 5.5 million shares are available for
grant under the 2005 Equity Incentive Plan.
The number of shares of US Airways Group common stock available for issuance under the 2005 Incentive Plan will be reduced by
(i) one share for each share of stock issued pursuant to a stock option or a stock appreciation right, and (ii) three shares for each share of
stock issued pursuant to a stock purchase award, stock bonus award, stock unit award, and other full-value types of stock awards. Stock
awards that are terminated, forfeited or repurchased will result in an increase in the share reserve of the 2005 Incentive Plan
corresponding to the reduction originally made in respect of the award.
If a stock award granted under the 2005 Incentive Plan or AWA's previous incentive plan (the "2002 Incentive Plan") expires or
otherwise terminates without being exercised in full, or if any shares of US Airways Group common stock issued pursuant to a stock
award under the 2005 Incentive Plan are forfeited to or repurchased by US Airways Group, including, but not limited to, any repurchase
or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, then the shares of
US Airways Group common stock not issued under that stock award, or forfeited to or repurchased by US Airways Group, will revert to
and
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