<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AIRNET SYSTEMS, 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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AIRNET SYSTEMS, INC.
3939 INTERNATIONAL GATEWAY
COLUMBUS, OHIO 43219
JULY 13, 1998
------------------------
Dear Fellow Shareholders:
The Annual Meeting of the Shareholders (the "Annual Meeting") of AirNet
Systems, Inc., an Ohio corporation ("AirNet"), will be held at 10:00 a.m., local
time, on Wednesday, August 19, 1998, at the Concourse Hotel, 4300 International
Gateway, Columbus, Ohio. The enclosed Notice of Annual Meeting and Proxy
Statement contain detailed information about the business to be conducted at the
Annual Meeting.
You are being asked to consider and vote upon the election of six directors,
each for a term to expire at the 1999 Annual Meeting, and upon the approval of
the amendment and restatement of AirNet's 1996 Incentive Stock Plan. Your Board
of Directors recommends that you vote FOR the six nominees named in the enclosed
Proxy Statement and FOR the approval of the amended and restated 1996 Incentive
Stock Plan.
On behalf of the Board of Directors and management, we cordially invite you
to attend the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, the prompt return of your proxy in the enclosed return envelope will
save AirNet additional expenses of solicitation and will help ensure that as
many common shares as possible are represented.
Sincerely,
Gerald G. Mercer
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
[LOGO]
AIRNET SYSTEMS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, AUGUST 19, 1998
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of AirNet Systems, Inc., an Ohio corporation ("AirNet"), will be held
on Wednesday, August 19, 1998, at the Concourse Hotel, 4300 International
Gateway, Columbus, Ohio, at 10:00 a.m., local time, for the following purposes:
1. To elect six directors, each for a term to expire at the 1999 Annual
Meeting.
2. To amend and restate AirNet's 1996 Incentive Stock Plan in the form
attached hereto as Appendix I.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
The close of business on July 3, 1998, has been fixed by the Board of
Directors of AirNet as the record date for determining the shareholders entitled
to notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you may insure your representation by
completing, signing, dating and promptly returning the enclosed proxy card. A
return envelope, which requires no postage if mailed in the United States, has
been provided for your use. If you attend the Annual Meeting and inform the
Secretary of AirNet in writing that you wish to vote your common shares in
person, your proxy will not be used.
By Order of the Board of Directors
William R. Sumser,
SECRETARY
AirNet Systems, Inc.
3939 International Gateway
Columbus, Ohio 43219
July 13, 1998
<PAGE>
AIRNET SYSTEMS, INC.
3939 INTERNATIONAL GATEWAY
COLUMBUS, OHIO 43219
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, AUGUST 19, 1998
This Proxy Statement is furnished to the shareholders of AirNet Systems,
Inc., an Ohio corporation ("AirNet"), in connection with the solicitation on
behalf of the Board of Directors of AirNet of proxies for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Wednesday, August
19, 1998, at the Concourse Hotel, 4300 International Gateway, Columbus, Ohio, at
10:00 a.m., local time, and at any adjournment(s) thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders.
This Proxy Statement and the accompanying proxies are first being mailed on
or about July 13, 1998, to all shareholders of AirNet.
GENERAL
Only holders of record of AirNet common shares, $.01 par value ("AirNet
Common Shares"), at the close of business on July 3, 1998 (the "Record Date"),
will be entitled to vote at the Annual Meeting. As of the Record Date, there
were 12,594,170 AirNet Common Shares outstanding. Each AirNet Common Share
entitles the holder to one vote. A quorum for the Annual Meeting is a majority
of the AirNet Common Shares outstanding. There is no cumulative voting. Other
than the AirNet Common Shares, there are no voting securities of AirNet
outstanding.
AirNet Common Shares represented by signed proxies that are returned to
AirNet will be counted toward the quorum in all matters even though they are
marked as "Abstain," "Against" or "Withhold Authority" on one or more or all
matters or they are not marked at all. The effect of an abstention on each of
the matters to be voted on at the Annual Meeting is the same as a "no" vote.
Broker/dealers, who hold their customers' AirNet Common Shares in street name,
may, under the applicable rules of the exchange and other self-regulatory
organizations of which the broker/dealers are members, sign and submit proxies
for such AirNet Common Shares and may vote such AirNet Common Shares on routine
matters, which, under such rules, typically include the election of directors
and the approval of certain stock compensation plans, but broker/dealers may not
vote such AirNet Common Shares on other matters, which typically include
significant corporate transactions such as mergers and acquisitions, amendments
to the charter documents of AirNet and the approval of certain stock
compensation plans, without specific instructions from the customer who owns
such AirNet Common Shares. Proxies signed and submitted by broker/ dealers which
have not been voted on certain matters as described in the previous sentence are
referred to as broker non-votes. Since the election of directors and the
proposal to approve the amendment and restatement of AirNet's 1996 Incentive
Stock Plan are "routine" items upon which broker/dealers may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions within the required time frame before the Annual Meeting, there
should be no "broker non-votes" with respect to the matters to be voted upon at
the Annual Meeting.
If the accompanying proxy card is properly signed and returned to AirNet
prior to the Annual Meeting and not revoked, it will be voted in accordance with
the instructions contained therein. If no instructions are given, the persons
designated as proxies in the accompanying proxy card will vote FOR the election
as directors of those persons named below and FOR all other proposals set forth
herein.
The Board of Directors is not currently aware of any matters other than
those referred to herein which will come before the Annual Meeting. If any other
matter should be presented at the Annual Meeting for action, the persons named
in the accompanying proxy card will vote the proxy in their own discretion.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
AirNet, by submitting a subsequently dated proxy or by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting will not, in
itself, constitute revocation of the proxy.
<PAGE>
The expense of preparing, printing and mailing proxy materials to the AirNet
shareholders will be borne by AirNet. In addition, proxies may be solicited
personally or by telephone by officers or associates of AirNet, none of whom
will receive additional compensation therefor. AirNet has engaged Corporate
Investor Communications, Inc. to assist in the solicitation of proxies from
AirNet shareholders at a fee of not more than $5,000 plus reimbursement of
reasonable out-of-pocket expenses. AirNet will also reimburse brokerage houses
and other nominees for their reasonable expenses in forwarding proxy materials
to beneficial owners of the AirNet Common Shares.
BENEFICIAL OWNERSHIP OF AIRNET COMMON SHARES
The following table sets forth the number and percentage of outstanding
AirNet Common Shares beneficially owned by (i) each director of AirNet; (ii)
each executive officer of AirNet included in the Summary Compensation Table;
(iii) all directors and executive officers of AirNet as a group; and (iv) each
person known by AirNet to own beneficially more than five percent of any class
of AirNet's voting securities, in each case, as of July 3, 1998 (except as
otherwise noted). AirNet believes that each individual or entity named has sole
investment and voting power with respect to the AirNet Common Shares indicated
as beneficially owned by such individual or entity, except as otherwise noted.
The address of each of the executive officers and directors is c/o AirNet, 3939
International Gateway, Columbus, Ohio 43219.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
<TABLE>
<CAPTION>
AIRNET
COMMON SHARES
WHICH CAN BE
ACQUIRED UPON
AIRNET EXERCISE OF
NAME OF COMMON SHARES OPTIONS PERCENT
BENEFICIAL OWNER OR PRESENTLY EXERCISABLE OF CLASS
NUMBER OF PERSONS IN GROUP HELD WITHIN 60 DAYS TOTAL (2)
- ---------------------------------------- ------------- -------------- --------- --------
<S> <C> <C> <C> <C>
Gerald G. Mercer (3)(4)................. 4,469,041 80,000 4,549,041 35.9%
Eric P. Roy (3)(5)...................... 189,975 42,000 231,975 1.8%
Donald D. Strench (3)................... 3,269 18,000 21,269 (6)
Glenn M. Miller (3)..................... 309,849 23,000 332,849 2.6%
Guy S. King (3)......................... 91,087 23,000 114,087 (6)
William R. Sumser (3)(7)................ 61,875 23,000 84,875 (6)
Kendall W. Wright (3)(8)................ 27,381 -- 27,381 (6)
Roger D. Blackwell...................... 7,700 2,000 9,700 (6)
Tony C. Canonie, Jr..................... 10,000 2,000 12,000 (6)
Russell M. Gertmenian (9)............... 5,000 2,000 7,000 (6)
J.F. Keeler, Jr. (10)................... 10,185 2,000 12,185 (6)
All directors and executive officers as
a group (12 persons).................. 5,185,362 223,000 5,408,362 42.2%
Wellington Management Company LLP
(11).................................. 728,400 -- 728,400 5.8%
75 State Street
Boston, MA 02109
AMVESCAP PLC (12)....................... 738,500 -- 738,500 5.9%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all AirNet Common Shares reflected in the table.
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<PAGE>
(2) The percent of class is based upon the sum of (i) 12,594,170 AirNet Common
Shares outstanding on July 3, 1998, and (ii) the number of AirNet Common
Shares as to which the named person has the right to acquire beneficial
ownership upon the exercise of options exercisable within 60 days of July
3, 1998.
(3) Individual named in the Summary Compensation Table.
(4) Of such 4,469,041 AirNet Common Shares, 1,010,000 AirNet Common Shares are
held of record by Mr. Mercer's wife, and 524,992 AirNet Common Shares are
held in the Gerald G. Mercer 5/30/96 Grantor Annuity Trust, of which Mr.
Mercer is the sole trustee. Mr. Mercer possesses sole voting and
dispositive power with respect to the AirNet Common Shares held in the
trust.
(5) Of such 189,975 AirNet Common Shares, 1,000 AirNet Common Shares are held
of record by each of Mr. Roy's two minor children, 80,000 AirNet Common
Shares are held in the Revocable Trust Created by Eric P. Roy and 80,000
AirNet Common Shares are held in the Revocable Trust Created by Carol P.
Roy, Mr. Roy's wife. Mr. Roy and his wife are co-trustees of each of the
trusts and share voting and dispositive power with respect to the AirNet
Common Shares held in such trusts.
(6) Represents ownership of less than 1% of the outstanding AirNet Common
Shares.
(7) Of such 61,875 AirNet Common Shares, 5,000 AirNet Common Shares are held by
Mr. Sumser's wife.
(8) Of such 27,381 AirNet Common Shares, 4,829 AirNet Common Shares are held by
Mr. Wright's wife.
(9) Of such 5,000 AirNet Common Shares, 2,100 AirNet Common Shares are held of
record by Mr. Gertmenian's wife.
(10) Of such 10,185 AirNet Common Shares, 7,500 AirNet Common Shares are held
by the J.F. Keeler, Jr. Limited Partnership, of which Mr. Keeler is the
sole general partner. Mr. Keeler possesses sole voting and investment
power with respect to the AirNet Common Shares held by the limited
partnership.
(11) Based on information contained in filings with the Securities and Exchange
Commission (the "Commission")(the latest of which is dated January 12,
1998), Wellington Management Corporation LLP is deemed to have beneficial
ownership of 728,400 AirNet Common Shares as of December 31, 1997. The
filing also indicates that the reporting person is deemed to have shared
voting power over 422,400 of such AirNet Common Shares and shared
dispositive power over 728,400 AirNet Common Shares.
(12) Based on information contained in filings with the Commission (the latest
of which is dated February 9, 1998), AMVESCAP PLC is deemed to have
beneficial ownership of 738,500 AirNet Common Shares as of December 31,
1997, all of which AirNet Common Shares it is deemed to share voting and
investment power with AVZ, Inc., AIM Management Group, Inc., AMVESCAP
Group Services, Inc., INVESCO, Inc., INVESCO North America Holdings, Inc.,
INVESCO Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management and Research, Inc., and INVESCO Realty Advisors, Inc. Those
filings with the Commission also indicate that the reporting persons
disclaim beneficial ownership of such AirNet Common Shares.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations of AirNet, the Board of Directors has
set the authorized number of directors at six. Each director holds office for a
term expiring at the next Annual Meeting. The Board of Directors proposes that
the six nominees described below be elected as directors, each for a new term to
expire at the 1999 Annual Meeting and until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. The Board of
Directors has no reason to believe that any of the nominees
3
<PAGE>
will not serve if elected, but if any of them should become unavailable to serve
as a director, and if the Board designates a substitute nominee, the persons
named in the accompanying proxy card will vote for the substitute nominee
designated by the Board of Directors.
The following information, as of May 31, 1998, with respect to the principal
occupation or employment, other affiliations and business experience of each
director during the last five years has been furnished to AirNet by each
director. Except where indicated, each director has had the same principal
occupation for the last five years.
NOMINEES STANDING FOR ELECTION TO THE BOARD OF DIRECTORS
GERALD G. MERCER
Mr. Mercer, 50, has served as Chairman of the Board, President and Chief
Executive Officer of AirNet since founding AirNet in 1974. He won Ohio's
"Entrepreneur of the Year" Award in 1996 and has been a member of the Young
Presidents' Organization since 1986. Mr. Mercer has been a guest speaker at
several major universities throughout the country.
ERIC P. ROY
Mr. Roy, 43, has been a Director of AirNet since 1994 and has served as
Chief Financial Officer of AirNet since 1986. Mr. Roy was named Executive Vice
President and Treasurer in 1991. Mr. Roy is a member of the Audit Committee.
ROGER D. BLACKWELL
Dr. Blackwell, 58, has been a Director of AirNet since December 1996. Dr.
Blackwell has been a Professor of Marketing at The Ohio State University for
more than five years and is also President and Chief Executive Officer of Roger
D. Blackwell Associates, Inc., a marketing consulting firm in Columbus, Ohio.
Dr. Blackwell is also a director of Intimate Brands, Inc., Worthington Foods,
Inc., Checkpoint Systems, Inc., Applied Industrial Technologies, Inc., Max &
Erma's Restaurants, Inc. and The Flex-Funds. Mr. Blackwell is a member of the
Compensation Committee.
TONY C. CANONIE, JR.
Mr. Canonie, 51, has been a Director of AirNet since June 1996. Since 1990,
Mr. Canonie has served as Chief Executive Officer of Canonie Ventures Inc., a
venture capital and advisory services firm, specializing in the waste industry.
He was an 18 year member and former Chapter Chairman of the Young Presidents'
Organization and is a member of the Chief Executives Organization and World
Presidents' Organization. Mr. Canonie is a member of the Compensation Committee.
RUSSELL M. GERTMENIAN
Mr. Gertmenian, 50, has been a Director of AirNet since June 1996. Mr.
Gertmenian has been a partner of Vorys, Sater, Seymour and Pease LLP since 1979
and currently serves as a member of such firm's Executive Committee. Mr.
Gertmenian is a director of Liqui-Box Corporation, a manufacturer of flexible
plastic packaging systems. Mr. Gertmenian is a member of the Audit Committee.
J.F. KEELER, JR.
Mr. Keeler, 57, has been a Director of AirNet since June 1996. Mr. Keeler is
President, Chief Executive Officer and Chairman of the Board of The Fishel
Company, a national utilities construction firm, which he first joined in 1967.
Mr. Keeler is a director of Bank One, N.A. and Metatec Corporation and serves on
the Board of Directors of the Columbus Chamber of Commerce. Mr. Keeler is a
member of the Audit and Compensation Committees.
4
<PAGE>
NOMINATION PROCEDURE
The AirNet Code of Regulations provides that shareholder nominations for
election to the AirNet Board of Directors must be in writing and must be
personally delivered or mailed to the Secretary of AirNet not less than 60 nor
more than 90 days prior to any meeting of shareholders called for the election
of directors; provided, however, that if less than 70 days' notice or public
disclosure of the date of the meeting is given or made, such nomination must be
received at the principal executive offices of AirNet not later than close of
business on the tenth day following the day on which the notice of the date of
the meeting was mailed or public disclosure was made thereof. Such notification
must contain the following information: (a) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the shareholder is a recordholder of
shares of AirNet entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee or any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Commission had the nominee been nominated, or
intended to be nominated, by the Board of Directors of AirNet; and (e) the
consent of each nominee to serve as a director of AirNet if so elected. The
chairman of the Annual Meeting may refuse to acknowledge the nomination of any
person not made in compliance with the AirNet Code of Regulations.
RECOMMENDATION AND VOTE
Under Ohio law and AirNet's Code of Regulations, the six nominees for
election to the Board of Directors receiving the greatest number of votes will
be elected.
AirNet Common Shares represented by the accompanying proxy card will be
voted FOR the election of the nominees named in "Nominees Standing for Election
to the Board of Directors" unless authority to vote for one or more nominees is
withheld. Shareholders may withhold authority to vote for the entire slate as
nominated or, by writing the name of one or more nominees in the space provided
in the proxy card, withhold the authority to vote for such nominee or nominees.
AirNet Common Shares as to which the authority to vote is withheld will be
counted for quorum purposes but will not be counted toward the election of
directors, or toward the election of the individual nominees specified on the
form of proxy.
THE AIRNET BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF ITS NOMINEES FOR DIRECTORS, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON
THE ENCLOSED PROXY CARD.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors held five regularly scheduled or special meetings
during the fiscal year ended December 31, 1997 (the "1997 fiscal year"). The
Board of Directors has two standing committees: the Audit Committee and the
Compensation Committee. Each current member of the Board attended at least 75%
of the aggregate of the total number of meetings of the Board of Directors and
of the committees on which he served during the 1997 fiscal year.
AUDIT COMMITTEE. The Audit Committee reviews and approves the scope and
results of any outside audit of AirNet and the fees therefor and makes
recommendations to the Board of Directors or management concerning auditing and
accounting matters and the selection of outside auditors. The Audit Committee
held two regularly scheduled or special meetings during the 1997 fiscal year.
COMPENSATION COMMITTEE. The Compensation Committee reviews, considers and
acts upon matters of salary and other compensation and benefits of all executive
officers and certain other associates of AirNet, as well as acts upon all
matters concerning, and exercises such authority as is delegated to it under the
provisions of, any benefit, retirement or pension plan maintained by AirNet for
the benefit of such
5
<PAGE>
executive officers or other associates. The Compensation Committee held nine
regularly scheduled or special meetings during the 1997 fiscal year.
COMPENSATION OF DIRECTORS
Directors who are officers or associates of AirNet receive no additional
compensation for their services as members of the Board of Directors or as
members of Board committees. In 1997, directors who were not officers or
associates of AirNet ("Non-Employee Directors") were paid a quarterly fee of
$1,500, as well as additional fees of $1,000 for each meeting of the Board or of
a Board committee attended. In 1998, each Non-Employee Director will be paid a
quarterly fee of $3,500, as well as additional fees of $1,500 for each meeting
of the Board attended. In addition, in 1998, all members of a committee of the
Board, other than the chairman of such committee, will receive a fee of $1,000
for attending a committee meeting; while the chairman will receive a fee of
$2,000. AirNet's directors are reimbursed for out-of-pocket expenses incurred in
connection with their service as directors, including travel expenses.
Effective May 27, 1998, AirNet established the AirNet Systems, Inc. Director
Deferred Compensation Plan (the "Director Plan"). Voluntary participation in the
Director Plan enables a director of AirNet, or of its subsidiaries, to defer all
or a part of his or her director's fees, including federal income tax thereon.
Such deferred fees may be credited to (1) a cash account where such funds will
earn interest at the rate prescribed in the Director Plan or (2) a stock account
where such funds will be converted into AirNet Common Shares. Distribution of
the deferred funds is made in a single lump sum payment or in equal annual
installments over a period of not more than ten years commencing within 30 days
of the earlier of (a) the date specified by a director at the time a deferral
election is made or (b) the date the director ceases to be such. Cash accounts
will be distributed in the form of cash and stock accounts will be distributed
in the form of AirNet Common Shares or cash, as selected by the director.
In addition, pursuant to AirNet's 1996 Incentive Stock Plan, each
Non-Employee Director received an option in 1997 to purchase 2,000 AirNet Common
Shares. If the proposal to amend and restate the 1996 Incentive Stock Plan is
approved (see "PROPOSAL TO AMEND AND RESTATE THE AIRNET SYSTEMS, INC. 1996
INCENTIVE STOCK PLAN"), each Non-Employee Director who is then serving on the
Board will automatically be granted an option to purchase 20,000 AirNet Common
Shares effective on the date of the Annual Meeting and any individual who
thereafter becomes a Non-Employee Director will automatically be granted an
option to purchase 20,000 AirNet Common Shares effective on the date on which he
is appointed or elected to the Board of Directors. In each case, the option will
vest in five equal annual installments beginning on the date of grant, with such
vesting being accelerated upon the occurrence of certain events. The exercise
price of each option granted to a Non-Employee Director is equal to the fair
market value of the AirNet Common Shares on the date of grant. Each option
granted to a Non-Employee Director has a ten-year term.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1997,
September 30, 1996 and 1995 and the three months ended December 31, 1996,
compensation awarded or paid to, or earned by, AirNet's Chief Executive Officer
during 1997 and the six other most highly compensated executive officers of
AirNet (the "Named Executive Officers").
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------------ OPTIONS/ SARS ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS (1) COMPENSATION
- ------------------------------------ ------------------ ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Gerald G. Mercer 12 mos 12/31/97 $ 410,776 -- 20,000 $ 4,750(2)
Chairman of the Board, 12 mos 9/30/96 706,667 $ 593,424 40,000 4,499
President and Chief 12 mos 9/30/95 826,376 1,161,333 -- 6,022
Executive Officer 3 mos 12/31/96 100,000 -- -- --
Eric P. Roy 12 mos 12/31/97 282,408 -- 12,000 4,750(2)
Executive Vice President, 12 mos 9/30/96 181,333 157,630 20,000 56,615
Treasurer and Chief 12 mos 9/30/95 129,332 167,646 -- 59,363
Financial Officer 3 mos 12/31/96 68,750 -- -- --
Donald D. Strench (3) 12 mos 12/31/97 197,885 80,000 8,000 4,750(2)
Vice President, 12 mos 9/30/96 78,750 43,750 10,000 --
Corporate Development 12 mos 9/30/95 -- -- -- --
3 mos 12/31/96 43,750 8,750 -- --
Glenn M. Miller 12 mos 12/31/97 205,385 -- 8,000 4,750(2)
Vice President, 12 mos 9/30/96 156,333 168,823 15,000 145,107
Operations 12 mos 9/30/95 129,332 235,681 -- 146,787
3 mos 12/31/96 50,000 -- -- --
Guy S. King 12 mos 12/31/97 205,385 -- 8,000 4,750(2)
Vice President, Sales 12 mos 9/30/96 156,333 133,114 15,000 27,895
12 mos 9/30/95 129,332 144,857 -- 31,380
3 mos 12/31/96 50,000 -- -- --
William R. Sumser 12 mos 12/31/97 205,385 -- 8,000 4,750(2)
Vice President, Finance, 12 mos 9/30/96 120,000 86,738 15,000 10,719
Controller and Secretary 12 mos 9/30/95 75,962 72,232 -- 13,385
3 mos 12/31/96 50,000 -- -- --
Kendall W. Wright 12 mos 12/31/97 205,385 -- 8,000 4,750(2)
Vice President, Sales 12 mos 9/30/96 156,333 135,474 15,000 24,421
12 mos 9/30/95 129,332 148,918 -- 26,763
3 mos 12/31/96 50,000 -- -- 142
</TABLE>
- ------------------------
(1) These numbers represent options for AirNet Common Shares granted pursuant to
AirNet's 1996 Incentive Stock Plan. See the table under "OPTION GRANTS
BETWEEN OCTOBER 1, 1996 AND DECEMBER 31, 1997" for more detailed information
on such options.
(2) "All Other Compensation" for the Named Executive Officers consists of
amounts contributed by AirNet to the accounts of the Named Executive
Officers under the Savings Plan (as defined below). See "--Section 401(k)
Savings Plan."
(3) Mr. Strench joined AirNet in April, 1996.
7
<PAGE>
SECTION 401(K) SAVINGS PLAN
AirNet maintains a defined contribution savings plan (the "Savings Plan")
which is intended to qualify under Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code"). Under the terms of the Savings Plan, all
associates who have worked a minimum of six months for AirNet may contribute up
to 15% of their annual earnings to the Savings Plan. AirNet may elect, in its
discretion, to make a matching contribution to the Savings Plan. Currently,
AirNet's annual matching contributions under the Savings Plan do not exceed 3%
of total compensation. In addition, AirNet may elect, in its discretion, to make
profit-sharing contributions on behalf of eligible associates.
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of
options made from October 1, 1996 through December 31, 1997 to each of the Named
Executive Officers. AirNet has never granted stock appreciation rights.
OPTION GRANTS BETWEEN OCTOBER 1, 1996 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM (2)
OPTIONS TO ASSOCIATES IN PRICE ----------------------
NAME GRANTED (1) PERIOD ($/SHARE) EXPIRATION DATE 5% 10%
- -------------------------------- ----------- ---------------- ----------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald G. Mercer................ 13,400 4.7% $ 14.25 April 10, 2007 $ 120,087 $ 304,325
6,600 2.3 15.68 April 10, 2002 28,593 63,180
Eric P. Roy..................... 12,000 4.3 14.25 April 10, 2007 107,541 272,530
Donald D. Strench............... 8,000 2.8 14.25 April 10, 2007 71,694 181,687
Glenn M. Miller................. 8,000 2.8 14.25 April 10, 2007 71,694 181,687
Guy S. King..................... 8,000 2.8 14.25 April 10, 2007 71,694 181,687
William R. Sumser............... 8,000 2.8 14.25 April 10, 2007 71,694 181,687
Kendall W. Wright............... 8,000 2.8 14.25 April 10, 2007 71,694 181,687
</TABLE>
- ------------------------
(1) These options were granted under AirNet's 1996 Incentive Stock Plan. All of
such options are fully vested. At the discretion of the Compensation
Committee, such options may have stock-for-stock exercise and tax
withholding features, which allow the holders, in lieu of paying cash for
the exercise price and any tax withholding, to have AirNet commensurably
reduce the number of AirNet Common Shares to which the holders would
otherwise be entitled upon exercise of such options.
(2) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on option exercises will
be dependent on the actual appreciation of the AirNet Common Shares over the
term of the options. There can be no assurances that the Potential
Realizable Values reflected in this table will be achieved.
8
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to options exercised
between October 1, 1996 and December 31, 1997 and unexercised options held as of
December 31, 1997 by each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES BETWEEN OCTOBER 1, 1996 AND
DECEMBER 31, 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SECURITIES UNDERLYING OPTIONS AT THE-MONEY OPTIONS AT FISCAL
UNDERLYING FISCAL YEAR END YEAR END (1)
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald G. Mercer........................ -- -- 60,000 -- $406,427 --
Eric P. Roy............................. -- -- 32,000 -- 227,000 --
Donald D. Strench....................... -- -- 18,000 -- 128,000 --
Glenn M. Miller......................... -- -- 23,000 -- 163,000 --
Guy S. King............................. -- -- 23,000 -- 163,000 --
William R. Sumser....................... -- -- 23,000 -- 163,000 --
Kendall W. Wright....................... 23,000 $140,000 -- -- -- --
</TABLE>
- ------------------------
(1) "Value of Unexercised In-the-Money Options at Fiscal Year End" is based upon
the fair market value of AirNet Common Shares on December 31, 1997 ($21.50)
less the exercise price of in-the-money options at December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
PURCHASE OF AIRNET HEADQUARTERS
In October 1997, AirNet purchased its corporate and operational headquarters
at 3939 International Gateway in Columbus, Ohio for $4.1 million from Mr.
Mercer, which represented fair market value as determined by an independent
appraisal performed by Kohr Royer Griffith, Inc. In addition to the building,
AirNet assumed Mr. Mercer's 25-year land lease with The Port Authority of
Columbus ("Port Authority"), which expires on December 31, 2009. The complex has
80,000 square feet, of which AirNet utilizes approximately 73,000 square feet.
The remainder is subleased to unrelated third parties. AirNet's headquarters is
currently used for operations, aircraft maintenance, vehicle maintenance,
general and administrative functions, and training. Prior to the purchase,
AirNet leased the facility from Mr. Mercer and paid a base rent of $75,000 per
month and made payments, on behalf of Mr. Mercer, to the Port Authority of
approximately $9,500 per month for use of the land upon which the facility is
located. AirNet paid rent of approximately $864,000 for the year ended December
31, 1997 and approximately $254,000 for the three months ended December 31, 1996
to Mr. Mercer. AirNet believes that the terms of the sublease were no less
favorable to AirNet than those reasonably available from unrelated third parties
for comparable space.
FLOAT CONTROL, INC./CHEXS PARTNERSHIP
On October 24, 1996, AirNet acquired Float Control, Inc. ("Float Control"),
which was a company owned by certain executive officers of AirNet and other
individuals and which owned an interest in The Check Exchange System Company
(the "CHEXS Partnership"), in a merger transaction. As the result of such merger
transaction, AirNet currently owns 19% of the CHEXS Partnership; Littlewood,
Shain and Company, an unaffiliated third party, owns 15%; and affiliates of The
Huntington National Bank own the remaining interests. The CHEXS Partnership
operates a national net settlement switch utilized by members of the National
Clearing House Association (the "NCHA"), which the CHEXS Partnership
9
<PAGE>
helped to found. The national net settlement switch operates as a clearinghouse
for NCHA member banks, pursuant to which such banks are able to settle
transactions with other NCHA members by utilizing the switch rather than having
to maintain a separate account with each such member. Canceled bank checks which
are settled through the NCHA typically are routed through AirNet's air
transportation system.
Pursuant to the merger transaction, Messrs. Mercer, Roy, Miller, King,
Wright and Sumser, all of whom are executive officers of AirNet, received AirNet
Common Shares having a fair market value at the time of the merger transaction
of $1,424,994, $74,089, $176,690, $42,743, $42,743 and $19,949, respectively, in
exchange for their shares of Float Control. In determining the value of the
shares of Float Control, AirNet utilized an evaluation of the value of the CHEXS
Partnership prepared by an unaffiliated third party evaluation firm. AirNet
believes that the terms of the merger transaction were fair to AirNet and were
no less favorable to AirNet than those reasonably available from unrelated third
parties.
PERFORMANCE GRAPH
The following line graph compares the percentage change in AirNet's
cumulative total shareholder return (as measured by dividing (i) the sum of (A)
the cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the price of AirNet Common Shares
at the end and the beginning of the measurement period; by (ii) the price of
AirNet Common Shares at the beginning of the measurement period) against the
cumulative return of the Russell 2000 and of the NYSE Combined Transportation
Index ("NYSE Transportation") for the period from May 30, 1996 to December 31,
1997. The AirNet Common Shares became registered under Section 12 of the
Exchange Act on May 30, 1996. The comparison assumes $100 was invested on May
30, 1996 in AirNet Common Shares and in each of the foregoing indices and
assumes reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AIRNET SYSTEMS VS. RUSSELL 2000 VS. NYSE
TRANSPORTATION
<S> <C> <C> <C>
Indexed Price Performance 5/30/96 - 12/31/97
ANS Russell 2000 NYSE Transportation
May-96 100.00 100.00 100.00
Jun-96 114.29 96.19 98.76
Sep-96 101.79 96.13 98.19
Dec-97 105.36 100.63 105.50
Mar-97 114.29 95.07 107.33
Jun-97 116.96 110.00 124.19
Sep-97 172.32 125.94 137.70
Dec-97 153.57 121.28 139.63
</TABLE>
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN AIRNET'S PREVIOUS
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934
(THE "EXCHANGE ACT") THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, IN WHOLE OR IN PART, THIS REPORT AND THE GRAPH SET FORTH ABOVE UNDER
"--PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
The Compensation Committee of the Board of Directors of AirNet (the
"Committee") is comprised of three outside directors, none of whom is or was
formerly an officer of AirNet. During the 1997 fiscal year, none of AirNet's
executive officers served on the board of any entity of which a Committee member
was an executive officer or on the compensation committee of any entity of which
any director of AirNet was an executive officer. The Committee has retained
outside legal counsel.
ROLE OF THE COMPENSATION COMMITTEE
Prior to AirNet's initial public offering (the "Offering"), which was
consummated on June 5, 1996, AirNet had no Compensation Committee, and decisions
concerning compensation of executive officers of AirNet were made by AirNet's
Chief Executive Officer. Following the Offering, the Committee undertook the
oversight responsibility for AirNet's executive compensation program.
In general, AirNet's compensation program for executive officers consists of
three main elements: a base salary, a discretionary bonus and periodic grants of
stock options. The Committee believes that it is important to pay competitive
salaries but also to make a high proportion of the executive officers' total
compensation at risk in order to cause the executive officers to focus on both
the short-term and the long-term interests of AirNet's shareholders. Therefore,
the bonus (which permits individual performance to be recognized on an annual
basis, and which is based, in part, on an evaluation of the contribution made by
the executive officer to company performance) and stock option grants (which
directly tie the executive officer's long-term remuneration to stock price
appreciation realized by AirNet's shareholders) are important components of the
overall compensation package.
In March 1998, the Committee retained Plante & Moran to perform a
comprehensive review of AirNet's compensation policy. The Committee has received
Plante & Moran's report and will consider Plante & Moran's recommendations with
respect to compensation for the 1998 fiscal year. However, the Committee has not
taken any actions with respect to such report.
BASE SALARY
Base salary is reviewed annually and may be adjusted on individual
performance, business unit performance and industry analysis and comparisons. To
date, the Committee has not utilized compensation consultants, but it may do so
in future years to assist the Committee with respect to industry analysis and
comparisons. With respect to the 1997 fiscal year, no specific weight was
assigned to any of the factors mentioned above in determining 1997 base salaries
for the Chief Executive Officer and the other executive officers.
Prior to AirNet's Offering, AirNet had elected to be treated as an S
Corporation under subchapter S of the Code for federal tax purposes and
comparable state tax laws. As a result of the S Corporation election, AirNet's
pre-existing shareholders were taxed directly on AirNet's income, whether or not
such income was distributed, and AirNet was not subject to federal income tax at
the corporate level. As a result of the S Corporation status, AirNet's executive
officers, and particularly Mr. Mercer, received significant cash distributions
in addition to sizable salaries and bonuses, as reflected in the Summary
Compensation Table for the 1995 fiscal year.
In connection with AirNet's Offering, which occurred with only four months
remaining in AirNet's 1996 fiscal year, AirNet's compensation arrangements with
its executive officers were restructured to reduce the amount of cash
compensation, particularly with respect to Mr. Mercer. In addition, AirNet's
11
<PAGE>
S Corporation status terminated in connection with the Offering, and the income
distributions to the pre-existing shareholders therefore also ceased. Mr.
Mercer, as AirNet's Chief Executive Officer, recommended the base salaries for
the executive officers for the remainder of the 1996 fiscal year, including a
reduction of more than 50% for himself, at the time of the Offering, and the
Committee accepted Mr. Mercer's recommendation
BONUS PLAN
Bonuses are awarded at the discretion of the Committee. Mr. Strench was the
only executive officer of AirNet who received a bonus with respect to the 1997
fiscal year. In awarding Mr. Strench's bonus, the Committee focused upon the
fact that AirNet consummated three acquisitions during the 1997 fiscal year and
the significant role Mr. Strench played in negotiating and completing those
acquisitions.
STOCK OPTIONS
The purpose of AirNet's 1996 Incentive Stock Plan is to attract and retain
key personnel and directors of AirNet and to enhance their interest in AirNet's
continued success. The maximum number of AirNet Common Shares with respect to
which awards may be granted under the 1996 Incentive Stock Plan is 1,150,000,
and the maximum number with respect to which any of the Named Executive Officers
may receive options in any one year is 50,000. The Board is proposing that the
AirNet shareholders approve the amendment and restatement of the 1996 Incentive
Stock Plan which would increase the number of AirNet Common Shares available
thereunder to 1,650,000 and increase the maximum number with respect to which
any Named Executive Officer may receive options in any one year to 200,000.
During 1997, AirNet granted stock options to each of its officers, the
details of which are provided in "EXECUTIVE COMPENSATION--Grant of Options."
These grants were based upon subjective analyses of each such key employee's
function, salary, length of service, performance and value to AirNet, as well as
the recommendations of AirNet's Chief Executive Officer, with no specific
weighting given to any of such factors. With respect to Mr. Mercer and the other
executive officers who were employed by AirNet prior to the Offering and who,
for the most part, took significant reductions in the cash portion of their
compensation package as a result of the restructuring in connection with the
Offering, the Committee believed that it was important to keep such executives
incentivized to continue their performance on behalf of AirNet and its
shareholders.
SECTION 162(m) COMPLIANCE
Section 162(m) of the Code places certain restrictions on the amount of
compensation in excess of $1,000,000 which may be deducted for each executive
officer. AirNet intends to satisfy the requirements of Section 162(m) should the
need arise.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF AIRNET:
TONY C. CANONIE, JR., CHAIRMAN
ROGER D. BLACKWELL
J.F. KEELER, JR.
12
<PAGE>
PROPOSAL NO. 2
PROPOSAL TO AMEND AND RESTATE THE
AIRNET SYSTEMS, INC. 1996 INCENTIVE STOCK PLAN
The AirNet Systems, Inc. 1996 Incentive Stock Plan (the "Incentive Stock
Plan") was established for the purpose of attracting and retaining key
personnel, including consultants and advisors to and directors of AirNet, and to
enhance their interest in AirNet's continued success and to allow all AirNet
associates an opportunity to have an ownership interest in AirNet.
The Incentive Stock Plan provides for the grant of incentive stock options
("ISOs") and non-qualified stock options ("NQSOs"), restricted stock and
performance shares (individually, an "Award" or, collectively, "Awards"). In
addition, the Incentive Stock Plan provides for the purchase of AirNet Common
Shares through payroll deduction by all associates of AirNet who have satisfied
certain eligibility requirements.
The number of AirNet Common Shares currently authorized for issuance under
the Incentive Stock Plan is 1,150,000, subject to adjustment to reflect certain
corporate events, including stock splits and similar transactions. As of July 3,
1998 (the Record Date for the Annual Meeting), options covering an aggregate of
242,225 AirNet Common Shares had been exercised; options covering an aggregate
of 626,425 AirNet Common Shares were outstanding; 250,000 AirNet Common Shares
had been reserved for the Associate Stock Purchase Program under the Incentive
Stock Plan; and a total of 31,350 AirNet Common Shares were available for future
grants of Awards. The number of AirNet Common Shares available for the grant of
new Awards under the Incentive Stock Plan is not sufficient to enable AirNet to
make the Awards which AirNet expects to make over the next several years. The
Board also believes that AirNet should have the flexibility to grant Awards to
meet competitive conditions and the particular circumstances of the key
personnel who may be eligible to receive Awards. For these reasons, the Board is
recommending the amendment of the Incentive Stock Plan to make an additional
500,000 AirNet Common Shares available thereunder. The Board is also
recommending certain amendments to the provisions of the Incentive Stock Plan
addressing the automatic grant of options to Non-Employee Directors and the
maximum number of AirNet Common Shares for which certain individuals may receive
options over a one-year period.
DESCRIPTION OF AMENDMENTS
The Board of Directors of AirNet has adopted, effective upon shareholder
approval at the Annual Meeting, the following amendments to the Incentive Stock
Plan (the "Amendments"):
1. The Incentive Stock Plan has been amended, subject to shareholder
approval, to increase the number of AirNet Common Shares which may be
issued thereunder from 1,150,000 to 1,650,000 AirNet Common Shares.
2. The Incentive Stock Plan has been amended, subject to shareholder
approval, to increase the number of AirNet Common Shares for which
certain individuals (the Chief Executive Officer and the four other
highest paid officers) may receive options (ISOs and NQSOs) over a
one-year period from 50,000 to 200,000.
3. The Incentive Stock Plan has been amended, subject to shareholder
approval, to replace the annual grant to Non-Employee Directors of an
option covering 2,000 AirNet Common Shares with a one-time grant of an
option covering 20,000 AirNet Common Shares. Such option will vest in
five equal annual installments beginning on the date of grant, with such
vesting being accelerated upon the occurrence of certain events described
in the Incentive Stock Plan.
13
<PAGE>
The Amendments are discussed in greater detail below.
OPERATION OF THE INCENTIVE STOCK PLAN
There follows a summary of the Incentive Stock Plan, as proposed to be
amended and restated. This summary is qualified in its entirety by reference to
the copy of the AirNet Systems, Inc. Amended and Restated 1996 Incentive Stock
Plan attached hereto as Appendix I.
AIRNET COMMON SHARES AVAILABLE UNDER THE INCENTIVE STOCK PLAN
If the Amendments are approved, the aggregate number of AirNet Common Shares
for which Awards may be made under the Incentive Stock Plan will increase from
1,150,000 to 1,650,000 AirNet Common Shares. The AirNet Common Shares covered by
the Incentive Stock Plan will be made available from the authorized but unissued
AirNet Common Shares or from AirNet Common Shares held in treasury. If there is
a forfeiture, termination or cancellation of any Award without the issuance of
AirNet Common Shares, the AirNet Common Shares subject to such Award will be
available for future grants. The Incentive Stock Plan contains customary
provisions with respect to adjustments for stock splits and similar transactions
and the rights of participants upon mergers and other business combinations.
ADMINISTRATION OF THE INCENTIVE STOCK PLAN
The Incentive Stock Plan is administered by the Compensation Committee of
the AirNet Board of Directors (the "Committee"). The Committee has the
discretion to select from among eligible associates those to whom Awards will be
granted and determine the terms and conditions applicable to each Award. With
respect to all non-executive officers (I.E., associates who are not subject to
the provisions of Section 16 of the Exchange Act), AirNet's Chief Executive
Officer may make recommendations to the Committee. The Committee also has the
sole and complete authority to interpret the provisions of the Incentive Stock
Plan. The Committee's decisions will be binding on AirNet and participants in
the Incentive Stock Plan.
ELIGIBILITY
Key associates of, and consultants and advisors to, AirNet and its
subsidiaries who can make substantial contributions to the successful
performance of AirNet and its subsidiaries are eligible to be granted Awards
under the Incentive Stock Plan. As described in "EXECUTIVE COMPENSATION-Report
of the Compensation Committee on Executive Compensation," the grant of options
under the Incentive Stock Plan is a significant element of AirNet's executive
compensation program. The following table sets forth the number and average
exercise price of options granted under the Incentive Stock Plan to: (i) each of
the Named Executive Officers; (ii) all current executive officers of AirNet as a
group; (iii) each of the directors of AirNet; (iv) all current directors of
AirNet who are not executive officers of AirNet as a group; and (v) all
associates of AirNet and its subsidiaries, including all current officers of
AirNet and its subsidiaries who are not executive officers of AirNet, as a
group. No other Awards have been made under the Incentive Stock Plan. No options
have been granted to associates of any of the
14
<PAGE>
directors or executive officers and, other than the persons identified in the
following table, no person has received 5% or more of the options granted under
the Incentive Stock Plan.
<TABLE>
<CAPTION>
OPTIONS GRANTED UNDER INCENTIVE
STOCK PLAN
--------------------------------
AVERAGE EXERCISE
NAME OR GROUP NUMBER PRICE
- -------------------------------------------------------------------------------- --------- ---------------------
<S> <C> <C>
Gerald G. Mercer................................................................ 110,000 $ 18.37
Eric P. Roy..................................................................... 82,000 19.38
Donald D. Strench............................................................... 18,000 14.39
Glenn M. Miller................................................................. 23,000 14.41
Guy S. King..................................................................... 23,000 14.41
Kendall W. Wright............................................................... 23,000 14.41
William R. Sumser............................................................... 23,000 14.41
Jeffrey B. Harris............................................................... 15,000 14.42
All current executive officers of AirNet as a group............................. 317,000 14.50
Roger D. Blackwell.............................................................. 2,000 14.75
Tony C. Canonie, Jr............................................................. 2,000 14.75
Russell M. Gertmenian........................................................... 2,000 14.75
J. F. Keller, Jr................................................................ 2,000 14.75
All current directors of AirNet who are not executive officers of AirNet as a
group......................................................................... 8,000 14.75
All associates of AirNet and its subsidiaries (including all current officers of
AirNet and its subsidiaries who are not executive officers of AirNet) as a
group......................................................................... 589,850 14.15
</TABLE>
- ------------------------
It is estimated that approximately 820 associates of AirNet and its
subsidiaries are currently eligible to participate in the Incentive Stock Plan
(including the Named Executive Officers). However, no determination has been
made as to the individual identity of the persons to whom future Awards may be
granted or the number of AirNet Common Shares which may be allocated to any
specific person or persons, other than with respect to the NQSOs which are to be
automatically granted to the Non-Employee Directors (i.e., Messrs. Blackwell,
Canonie, Gertmenian and Keeler) under the circumstances described in "--Terms of
Awards--Director Options." It is anticipated that the Committee's determination
of which eligible associates will be granted Awards in the future and terms
thereof will be based on each individual's present and potential contribution to
the success of AirNet and its subsidiaries.
If the proposal to amend and restate the Incentive Stock Plan is approved,
the maximum number of AirNet Common Shares for which certain individuals (the
Chief Executive Officer and the four other highest paid officers) may receive
options (ISOs and NQSOs) will be limited to 200,000 AirNet Common Shares over a
one-year period. Currently, such maximum number is 50,000.
DURATION
No Award under the Incentive Stock Plan may be granted after May 1, 2006.
TERMS OF AWARDS
OPTIONS
The Committee may grant NQSOs to associates, advisors and consultants but
may grant ISOs only to associates. The Committee has discretion to fix the
exercise price of such options, which, in the case of an ISO, may not be less
than the fair market value of the AirNet Common Shares on the date of grant. The
fair market value of the AirNet Common Shares on July 2, 1998 was $16 11/16. In
the case of an ISO granted to a 10% shareholder of AirNet, the exercise price
may not be less than 110% of the fair market value of
15
<PAGE>
the AirNet Common Shares on the date of grant. The Committee also has broad
discretion as to the terms and conditions under which such options will be
exercisable. ISOs expire not later than ten years after the date on which they
are granted (or five years in the case of an ISO granted to a 10% shareholder of
the Company). The exercise price of the options may be satisfied in cash or, in
the discretion of the Committee, by exchanging AirNet Common Shares owned by the
option holder, or by a combination of cash and AirNet Common Shares.
DIRECTOR OPTIONS
Each Non-Employee Director currently receives an annual grant of an NQSO to
purchase 2,000 AirNet Common Shares at an exercise price equal to the fair
market value of the AirNet Common Shares on the date of grant. If the proposal
to amend and restate the Incentive Stock Plan is approved, each Non-Employee
Director who is then serving on the Board will automatically be granted an NQSO
to purchase 20,000 AirNet Common Shares effective on the date of the Annual
Meeting and any individual who thereafter becomes a Non-Employee Director will
automatically be granted an option to purchase 20,000 Common Shares effective on
the date he is appointed or elected to the Board. In each case, the NQSO will
vest in five equal annual installments beginning on the date of grant, with such
vesting being accelerated if AirNet merges with another entity and is not the
surviving entity, or in the event all or substantially all of AirNet's assets or
stock is acquired by another entity. A director NQSO will be exercisable until
the earlier of (i) the tenth anniversary of the date of grant and (ii) three
months (one year in the case of a director who becomes disabled or dies) after
the date the director ceases to be a director; provided, however, that if a
director ceases to be a director after having been convicted of, or pled guilty
to, a felony, the director NQSO will be canceled on the date the director ceases
to be a director. The exercise price of the director NQSOs may be satisfied in
cash or, in the discretion of the Committee, by exchanging AirNet Common Shares
owned by the director, or by a combination of cash and AirNet Common Shares.
RESTRICTED STOCK AWARDS
An award of restricted stock is an award of AirNet Common Shares that is
subject to such restrictions as the Committee deems appropriate, including
forfeiture conditions and restrictions on transfer for a period specified by the
Committee. Awards of restricted stock may be granted under the Incentive Stock
Plan for or without consideration. Restrictions on restricted stock may lapse in
installments based on factors selected by the Committee. The Committee, in its
sole discretion, may waive or accelerate the lapsing of restrictions in whole or
in part. Prior to the expiration of the restricted period, except as otherwise
provided by the Committee, a participant who has been granted restricted stock
will, from the date of grant, have the rights of a shareholder of the Company in
respect of such AirNet Common Shares, including the right to vote such AirNet
Common Shares and to receive dividends and other distributions thereon, subject
to the restrictions set forth in the Incentive Stock Plan and in the instrument
evidencing such Award. The shares of restricted stock will be held by AirNet, or
by an escrow agent designated by AirNet, during the restricted period and may
not be sold, assigned, transferred, pledged or otherwise encumbered until the
restrictions have lapsed. The Committee has authority to determine the duration
of the restricted period and the conditions under which restricted stock may be
forfeited, as well as the other terms and conditions of such awards.
PERFORMANCE SHARE AWARDS
A performance share award is an award of a number of units that represent
the right to receive a specified number of AirNet Common Shares or cash, or
both, upon satisfaction of certain specified performance goals, subject to such
terms and conditions as the Committee determines. Performance share awards will
be earned to the extent such performance goals established by the Committee are
achieved over a period of time specified by the Committee. The Committee has
discretion to determine the value of each performance share award, to adjust the
performance goals as it deems equitable to reflect events affecting AirNet or
changes in law or accounting principles or other factors, and to determine the
extent to
16
<PAGE>
which performance share awards that are earned may be paid in the form of cash,
AirNet Common Shares or a combination of both.
ASSOCIATE STOCK PURCHASE PROGRAM
All associates of AirNet who have at least one year of service with AirNet
are given the opportunity to purchase AirNet Common Shares under the Incentive
Stock Plan through the Associate Stock Purchase Program. Pursuant to this
payroll deduction program, associates are able to purchase AirNet Common Shares
during four quarterly offering periods each year at a price equal to the lesser
of 85% of fair market value on the first business day of each offering period
and 85% of fair market value on the last business day of each offering period.
Certain restrictions contained in Section 423 of the Code apply to this payroll
deduction program, including a limitation on the maximum value of AirNet Common
Shares that may be purchased by an individual associate in any calendar year.
Upon purchase of AirNet Common Shares through payroll deduction, AirNet will
issue share certificates to the participating associates. As of July 3, 1998
(the Record Date for the Annual Meeting), 14,790 of the 250,000 AirNet Common
Shares reserved for issuance under the Associate Stock Purchase Program had been
purchased.
GENERAL
The Committee has broad discretion as to the specific terms and conditions
of each Award and any rules applicable thereto, including the effect, if any, of
a change in control of AirNet. The terms of each Award are to be evidenced by a
written instrument delivered to the participant. The AirNet Common Shares issued
under the Incentive Stock Plan are subject to applicable tax withholding by
AirNet which, to the extent permitted under Rule 16b-3 under the Exchange Act,
may be satisfied by the withholding of AirNet Common Shares issuable under the
Incentive Stock Plan. Any Awards granted under the Incentive Stock Plan may not
be assigned or transferred except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order.
AMENDMENTS AND TERMINATION
The Incentive Stock Plan may be amended or terminated at any time by the
Board of Directors; provided, however, that no such amendment or termination may
adversely affect a grantee's or an option holder's rights under any Award
previously granted under the Incentive Stock Plan, except with the consent of
such grantee or option holder. In addition, no amendment may be made without
shareholder approval if the Committee determines that such approval is necessary
to comply with any tax or regulatory requirement, including any approval that is
required as a prerequisite for exemptive relief from Section 16 of the Exchange
Act, for which or with which the Committee determines that it is desirable to
qualify or comply.
FEDERAL INCOME TAX MATTERS
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences in respect of ISOs,
NQSOs, restricted stock and performance share awards made under the Incentive
Stock Plan and participation in the Associate Stock Purchase Program are as
described below. The following discussion is not intended to be a complete
statement of applicable law and is based upon federal income tax laws as in
effect on the date hereof.
ISOS
An option holder who is granted an ISO does not recognize taxable income
either on the date of grant or on the date of exercise. However, upon the
exercise of the ISO, the difference between the fair market value of the AirNet
Common Shares received and the exercise price is a tax preference item
potentially subject to the alternative minimum tax. However, on the later sale
or other disposition of the AirNet Common Shares, generally only the difference
between the fair market value of the AirNet Common
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Shares on the exercise date and the amount realized on the sale or disposition
is includable in alternative minimum taxable income.
Upon disposition of AirNet Common Shares acquired upon the exercise of an
ISO, capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the option holder disposes of the AirNet Common
Shares within two years of the date of grant or within one year from the date of
the issuance of the AirNet Common Shares to the option holder (a "Disqualifying
Disposition"), then the option holder will recognize ordinary income, as opposed
to capital gain, at the time of the disposition. In general, the amount of
ordinary income recognized will be equal to the lesser of (i) the amount of gain
realized on the disposition, or (ii) the difference between the fair market
value of the AirNet Common Shares received on the date of exercise and the
exercise price. Any remaining gain or loss is treated as a short-term, mid-term
or long-term capital gain or loss, depending upon the period of time the AirNet
Common Shares have been held.
AirNet is not entitled to a tax deduction upon either the exercise of an ISO
or the disposition of AirNet Common Shares acquired pursuant to such exercise,
except to the extent that the option holder recognizes ordinary income in a
Disqualifying Disposition. Ordinary income from a Disqualifying Disposition will
constitute compensation but will not be subject to tax withholding, nor will it
be considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part, with
already-owned AirNet Common Shares, the exchange should not affect the ISO tax
treatment of the exercise. Upon such exchange, and except for Disqualifying
Dispositions, no gain or loss is recognized by the option holder upon delivering
already-owned AirNet Common Shares for payment of the exercise price. The AirNet
Common Shares received by the option holder, equal in number to the
already-owned AirNet Common Shares exchanged therefor, will have the same basis
and holding period for capital gain purposes as the already-owned AirNet Common
Shares. The option holder, however, will not be able to use the prior holding
period for the purpose of satisfying the ISO statutory holding period
requirements. AirNet Common Shares received by the option holder in excess of
the number of already-owned Common Shares will have a basis of zero and a
holding period which commences as of the date the AirNet Common Shares are
issued to the option holder upon exercise of the ISO. If the exercise of an ISO
is effected using AirNet Common Shares previously acquired through the exercise
of an ISO, the exchange of the already-owned AirNet Common Shares will be
considered a disposition of such Common Shares for the purpose of determining
whether a Disqualifying Disposition has occurred.
NQSOS
An option holder receiving an NQSO does not recognize taxable income on the
date of grant of the NQSO, provided the NQSO does not have a readily
ascertainable fair market value at the time it is granted. In general, the
option holder must recognize ordinary income at the time of exercise of the NQSO
in the amount of the difference between the fair market value of the AirNet
Common Shares on the date of exercise and the exercise price. The ordinary
income recognized will constitute compensation for which tax withholding
generally will be required. The amount of ordinary income recognized by an
option holder will be deductible by AirNet in the year that the option holder
recognizes the income if AirNet complies with the applicable withholding
requirements.
If the sale of the AirNet Common Shares could subject the option holder to
liability under Section 16(b) of the Exchange Act, the option holder generally
will recognize ordinary income only on the date that the option holder is no
longer subject to such liability in an amount equal to the fair market value of
the AirNet Common Shares on such date less the exercise price. Nevertheless, the
option holder may elect under Section 83(b) of the Code within 30 days of the
date of exercise to recognize ordinary income as of the date of exercise,
without regard to the restriction of Section 16(b).
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AirNet Common Shares acquired upon exercise of an NQSO will have a tax basis
equal to their fair market value on the exercise date or other relevant date on
which ordinary income is recognized, and the holding period for the AirNet
Common Shares generally will begin on the date of exercise or such other
relevant date. Upon subsequent disposition of the AirNet Common Shares, the
option holder will recognize long-term capital gain or loss if the option holder
has held the AirNet Common Shares for more than 18 months prior to disposition,
mid-term capital gain or loss if the option holder has held the AirNet Common
Shares for at least one year but less than 18 months, or short-term capital gain
or loss if the option holder has held the AirNet Common Shares for one year or
less.
If the holder of an NQSO pays the exercise price, in whole or in part, with
already-owned AirNet Common Shares, the option holder will recognize ordinary
income in the amount by which the fair market value of the AirNet Common Shares
received exceeds the exercise price. The option holder will not recognize gain
or loss upon delivering such already-owned AirNet Common Shares to AirNet.
AirNet Common Shares received by an option holder, equal in number to the
already-owned AirNet Common Shares exchanged therefor, will have the same basis
and holding period as such already-owned AirNet Common Shares. AirNet Common
Shares received by an option holder in excess of the number of such
already-owned AirNet Common Shares will have a basis equal to the fair market
value of such additional AirNet Common Shares as of the date ordinary income is
recognized. The holding period for such additional AirNet Common Shares will
commence as of the date of exercise or such other relevant date.
RESTRICTED STOCK AWARD
An associate who is granted a restricted stock award will not be taxed upon
the acquisition of such AirNet Common Shares so long as the interest in such
AirNet Common Shares is subject to a substantial risk of forfeiture. Upon lapse
or release of the restrictions, the associate will be taxed at ordinary income
tax rates on an amount equal to either the current fair market value of the
AirNet Common Shares (in the case of lapse or termination) or the sale price (in
the case of a sale), less any consideration paid for the AirNet Common Shares.
AirNet will be entitled to a corresponding deduction. The basis of restricted
stock held after lapse or termination of restrictions will be equal to its fair
market value on the date of lapse or termination of restrictions, and upon
subsequent disposition, any further gain or loss will be a long-term, mid-term
or short-term capital gain or loss, depending upon the length of time the AirNet
Common Shares are held.
An associate who is granted a restricted stock award may elect, within 30
days of such grant, under Section 83(b) of the Code to be taxed at ordinary
income tax rates on the full fair market value of the restricted stock at the
time of issuance (less any consideration paid). The basis of the AirNet Common
Shares so acquired will be equal to the fair market value at such time. If the
election is made, no tax will be payable upon the subsequent lapse or
termination of the restrictions, and any gain or loss upon disposition will be a
capital gain or loss.
PERFORMANCE SHARE AWARDS
The grant of a performance share award will not result in income for the
grantee or in a deduction for AirNet. Upon the receipt of AirNet Common Shares
or cash under a performance share award, the grantee will recognize ordinary
income and AirNet will be entitled to a deduction measured by the fair market
value of the AirNet Common Shares plus any cash received. Income tax withholding
will be required.
ASSOCIATE STOCK PURCHASE PROGRAM
The Associate Stock Purchase Program is intended to qualify as an "employee
stock purchase plan" within the meaning of Section 423 of the Code. Generally,
participants will recognize taxable income only on the disposition of AirNet
Common Shares purchased under the Program. Any participant who disposes of
AirNet Common Shares purchased under the Program will recognize ordinary income
in the year of such disposition in an amount equal to the lesser of (i) the
excess of the fair market value of the AirNet
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Common Shares at disposition over the purchase price of the AirNet Common
Shares; or (ii) the excess of the fair market value of the AirNet Common Shares
at the time the right to purchase was granted over the purchase price. Any
remaining gain will be taxed as a capital gain in the year of disposition. If,
however, the sales price is less than the purchase price paid by the
participant, the participant will recognize a capital loss. If the participant
has held the AirNet Common Shares acquired upon exercise of the right to
purchase less than one year, the capital gain or loss will be short-term; if the
participant has held such AirNet Common Shares for at least one year but less
than 18 months, the capital gain or loss will be mid-term; and if the
participant has held such AirNet Common Shares for at least 18 months, the
capital gain or loss will be long-term. Generally, in the event of a disposition
of AirNet Common Shares by a participant, the amount of ordinary income
attributable to the participant because of such disposition is deductible by
AirNet as an employer business deduction in the year of disposition.
OTHER MATTERS
The Incentive Stock Plan is intended to comply with Section 162(m) of the
Code with respect to options granted thereunder. Section 162(m) of the Code
prohibits a publicly-held corporation, such as AirNet, from claiming a deduction
on its federal income tax return for compensation in excess of $1 million paid
for a given fiscal year to the chief executive officer (or person acting in that
capacity) at the close of the corporation's fiscal year and the four most highly
compensated officers of the corporation, other than the chief executive officer,
at the end of the corporation's fiscal year. The $1 million compensation
deduction limitation does not apply to performance-based compensation. The
Internal Revenue Service has issued regulations under Section 162(m) setting
forth a number of provisions which compensatory plans must contain for the
compensation paid thereunder to qualify as "performance-based" for purposes of
Section 162(m). AirNet is seeking shareholder approval of the Incentive Stock
Plan as amended and restated in a good faith effort to qualify compensation
received thereunder, in respect of options, as "performance-based" for purposes
of Section 162(m).
RECOMMENDATION AND VOTE
The Board of Directors of AirNet unanimously recommends that the
shareholders vote for the proposal to approve the amendment and restatement of
the Incentive Stock Plan. Unless otherwise directed, the persons named in the
enclosed proxy will vote the AirNet Common Shares represented by all proxies
received prior to the Annual Meeting, and not properly revoked, in favor of the
proposal to approve the amendment and restatement of the Incentive Stock Plan.
Shareholder approval of the proposed amendment and restatement of the
Incentive Stock Plan will require the affirmative vote of the holders of a
majority of the AirNet Common Shares, present in person or by proxy, and
entitled to vote on the proposal.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the AirNet Common Shares by executive
officers, directors and persons who own more than 10% of the AirNet Common
Shares are required to be reported to the Commission pursuant to Section 16 of
the Exchange Act. Based solely on a review of the copies of reports furnished to
AirNet and representations of certain executive officers and directors, AirNet
believes that during the fiscal year ended December 31, 1997, its officers,
directors and greater than 10% beneficial owners complied with such filing
requirements.
INDEPENDENT AUDITORS
AirNet engaged Ernst & Young LLP as its independent auditors to audit its
consolidated financial statements for the 1997 fiscal year. Ernst & Young LLP, a
certified public accounting firm, has served as AirNet's independent auditors
since 1989. AirNet's Audit Committee will make its selection of AirNet's
independent auditors for the 1998 fiscal year at its next meeting, which will be
held after the Annual Meeting.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to respond to appropriate questions and to make such statements
as he may desire.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
AirNet shareholders seeking to bring business before the 1999 Annual Meeting
of Shareholders, or to nominate candidates for election as directors at such
Annual Meeting of Shareholders, must provide timely notice thereof in writing.
To be timely, a shareholder's notice must be delivered to or mailed and received
at the principal executive offices of AirNet not less than 60 days nor more than
90 days prior to the meeting; provided, however, that in the event that less
than 70 days' notice or prior public disclosure of the date of the 1999 Annual
Meeting is given or made to the shareholders, notice by the shareholder to be
timely must be received no later than the close of business on the tenth day
following the day on which such notice of the date of the 1999 Annual Meeting
was mailed or such public disclosure was made. The AirNet Code of Regulations
specify certain requirements for a shareholder's notice to be in proper written
form. The foregoing requirements will not, however, prevent any shareholder from
submitting a shareholder proposal in compliance with Rule 14a-8 of the Exchange
Act. Pursuant to Rule 14a-8, proposals by shareholders intended to be presented
at the 1999 Annual Meeting of Shareholders must be in the form specified in that
Rule and received by the Secretary of AirNet no later than March 15, 1999, to be
included in AirNet's proxy, notice of meeting and proxy statement relating to
such meeting and should be mailed to AirNet Systems, Inc., 3939 International
Gateway, Columbus, Ohio 43219, Attention: Secretary.
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be presented
for action at the 1998 Annual Meeting. If any other matter requiring a vote of
the shareholders properly comes before the Annual Meeting, the persons
authorized under management proxies will vote and act according to their best
judgments in light of the conditions then prevailing.
ANNUAL REPORT
On March 30, 1998, AirNet's 1997 Annual Report to Shareholders containing
audited financial statements for the fiscal year ended December 31, 1997 was
mailed to all shareholders of record on March 9, 1998. A copy of such Annual
Report to Shareholders is being mailed herewith to all persons who were
shareholders of record on the Record Date but were not shareholders on March 9,
1998.
The form of proxy and the Proxy Statement have been approved by the Board of
Directors of AirNet and are being mailed and delivered to shareholders by its
authority.
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APPENDIX I
AIRNET SYSTEMS, INC.
AMENDED AND RESTATED
1996 INCENTIVE STOCK PLAN
SECTION 1. PURPOSES. The purposes of the Amended and Restated AirNet
Systems, Inc. 1996 Incentive Stock Plan are to promote the interests of AirNet
Systems, Inc. and its shareholders by (a) attracting and retaining exceptional
executive personnel and other key employees of, and advisors and consultants to,
and directors of the Company and its Subsidiaries; (b) motivating such
employees, advisors and consultants and Eligible Directors by means of
performance-related incentives to achieve longer-range performance goals; and
(c) providing all long-term employees of the Company and its Subsidiaries with
the opportunity to participate in the long-term growth and financial success of
the Company.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
"Award" shall mean any Option, Restricted Stock Award or Performance Award
but shall not include any Director Option, any Right to Purchase or any Share
issued pursuant to Section 10 of this Plan.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award which may, but need not, be executed
or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Cash Account" shall mean an account established for each Participant to
which amounts withheld through payroll deductions shall be credited to purchase
Shares under the provisions of Section 10.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan which shall satisfy the requirements contained in Section
1.162-27(c)(4) of the Final Regulations. The Committee shall be composed of not
less than the minimum number of persons from time to time required by Rule
16b-3, each of whom shall be (a) a person from time to time permitted by the
rules promulgated under Section 16 of the Exchange Act in order for grants of
Awards to be exempt transactions under said Section 16; and (b) receiving
remuneration in no other capacity than as a director, except as permitted under
Section 1.162-27(e)(3) of the Final Regulations.
"Company" shall mean AirNet Systems, Inc., together with any successor
thereto.
"Covered Employee" shall mean any individual who, on the last day of the
Company's taxable year, is
(a) the chief executive officer of the Company or is acting in such
capacity; or
(b) among the four highest compensated officers (other than the chief
executive officer).
For this purpose, whether an individual is the chief executive officer or
one of the four highest compensated officers of the Company shall be determined
pursuant to the executive compensation disclosure rules under the Exchange Act.
"Director Option" shall mean a Non-Qualified Stock Option granted to each
Eligible Director pursuant to Section 6(e) without any action by the Board or
the Committee.
"Effective Date" shall mean the date on which the Plan is approved by the
shareholders of the Company.
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"Eligible Director" shall mean, on any date, a person who is serving as a
member of the Board but shall not include a person who is an Employee of the
Company or a Subsidiary or a person who was a member of the Board on May 1,
1996.
"Employee" shall mean (a) an employee of the Company or of any Subsidiary;
and (b) except with respect to an Incentive Stock Option, a Right to Purchase
and the issuance of Shares under Section 10, an advisor or consultant to the
Company or to any Subsidiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in its sole discretion,
provided that the fair market value of Shares shall be determined by reference
to the most recent closing price quotation or, if none, the average of the bid
and asked prices, as reported as of the most recent available date with respect
to the sale of Shares on any quotation system approved by the National
Association of Securities Dealers then reporting sales of Shares or on any
national securities exchange on which the Shares are then listed.
"Final Regulations" shall mean the final regulations promulgated by the
Internal Revenue Service under Section 162(m) of the Code.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not intended to
be an Incentive Stock Option.
"Offering" shall mean an opportunity provided by the Committee to purchase
Shares under the provisions of Section 10. Offerings may be consecutive or
concurrent, as determined by the Committee. The Committee shall designate the
maximum number of Shares that may be purchased under each Offering. Shares not
sold under one Offering may be offered again in any subsequent Offering.
"Offering Effective Date" shall mean the first business day of the month
designated by the Committee as the start of the Offering Period applicable to an
Offering.
"Offering Period" shall mean the duration of an Offering, as designated by
the Committee. The Offering Period for any Offering shall not exceed 12 months.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option but shall not include a Director Option.
"Participant" shall mean any Employee selected by the Committee to receive
an Award under the Plan. In addition, for purposes of Section 10, the term
"Participant" shall include any Employee who has satisfied the requirements of
such section to acquire Shares under the Plan.
"Performance Award" shall mean any right granted under Section 8 of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean the AirNet Systems, Inc. Amended and Restated 1996
Incentive Stock Plan.
"Restricted Stock" shall mean any Share granted under Section 7 of the Plan.
"Right to Purchase" shall mean an option to purchase Shares granted to a
Participant who elects to participate in an Offering under the provisions of
Section 10. A Right to Purchase granted for an Offering shall terminate
following the close of business on the Right to Purchase Date for that Offering
to the extent that such Right to Purchase is not exercised on such Right to
Purchase Date.
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"Right to Purchase Date" shall mean the last business day of an Offering
Period to purchase Shares under the provisions of Section 10.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in effect
from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
"Shares" shall mean the Common Shares, $0.01 par value, of the Company or
such other securities of the Company as may be designated by the Committee from
time to time.
"Share Account" shall mean an account established for each Participant who
exercises a Right to Purchase under Section 10. A Participant's Share Account
will be credited with the number of Shares purchased on each Right to Purchase
Date and debited for the number of Shares withdrawn by the Participant after
such date.
"Subsidiary" shall mean any corporation which, on the date of determination,
qualified as a subsidiary corporation of the Corporation under Section 424(f) of
the Code.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Company or with which the Company combines.
"Ten Percent Shareholder" shall mean any shareholder who, at the time an
Incentive Stock Option is granted to such shareholder, owns (within the meaning
of Section 424(d) of the Code) more than ten percent of the voting power of all
classes of stock of the Company or a Subsidiary.
"Year of Service" shall mean each 12 consecutive month period, beginning on
an Employee's date of hire with the Company or a Subsidiary (and anniversaries
of such date), during which an Employee is employed by the Company or a
Subsidiary. For this purpose, all service with the Company or a Subsidiary prior
to May 1, 1996 shall be included. Further, periods of service with the Company
or a Subsidiary which are interrupted by a termination of employment (not
including any authorized leave of absence) of more than two months shall not be
aggregated.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee; (iii) determine the
number of Shares to be covered by, or with respect to which payments, rights or
other matters are to be calculated in connection with Awards; (iv) determine the
terms and conditions of any Award or Director Option; (v) determine whether, to
what extent and under what circumstances Awards may be settled or exercised in
cash, Shares, other securities, other Awards or other property or canceled,
forfeited or suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to, or Award or Director Option made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award or Director Option shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon all Persons, including the Company, any subsidiary, any Participant, any
holder or beneficiary of any Award or Director Option, any shareholder and any
Employee.
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SECTION 4. SHARES AVAILABLE FOR THE PLAN.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b),
the number of Shares available for issuance under the Plan shall be 1,650,000.
If any Shares covered by an Award or Director Option granted under the Plan, or
to which such an Award or Director Option relates, or any Shares issued under
Section 10, are forfeited, or if an Award or Director Option otherwise
terminates or is canceled without the delivery of Shares, then the Shares which
may be issued under this Plan, to the extent of any such settlement, forfeiture,
termination or cancellation, shall again be, or shall become, Shares available
for issuance, to the extent permissible under Rule 16b-3. In the event that any
Option, Director Option or other Award granted hereunder is exercised through
the delivery of Shares, the number of Shares available under the Plan shall be
increased by the number of Shares surrendered, to the extent permissible under
Rule 16b-3.
(b) ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall proportionately adjust any or all (as necessary) of (i) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) which may be issued under the Plan; (ii) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards; (iii) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) and the purchase price per Share subject to purchase
under Section 10 hereof; and (iv) the grant or exercise price with respect to
any Award; provided, in each case, that with respect to Awards of Incentive
stock Options, no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code, as from
time to time amended. If, pursuant to the preceding sentence, an adjustment is
made to outstanding Options held by Participants, a corresponding adjustment
shall be made to outstanding Director Options and if, pursuant to the preceding
sentence, an adjustment is made to the number of Shares authorized for issuance
under the Plan, a corresponding adjustment shall be made to the number of Shares
subject to each Director Option thereafter granted pursuant to Section 6(e).
(c) SOURCES OF SHARES. Any Shares issued pursuant to the terms of this
Plan may consist, in whole or in part, of authorized and unissued Shares or of
treasury Shares.
SECTION 5. ELIGIBILITY FOR AWARDS AND DIRECTOR OPTIONS. Any Employee,
including any officer or employee-director of the Company or any Subsidiary, who
is not a member of the Committee, shall be eligible to be designated a
Participant for purposes of receiving an Award under the Plan. Each Eligible
Director shall receive nondiscretionary Director Options in accordance with
Section 6(e) hereof.
SECTION 6. OPTIONS AND DIRECTOR OPTIONS.
(a) GRANT. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Options shall be
granted, the number of Shares to be covered by each Option, the option price
therefor and the conditions and limitations applicable to the exercise of the
Option. The Committee shall have the authority to grant Incentive Stock Options
or to grant Non-Qualified Stock Options or to grant both types of options. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to, and comply with, such rules as may be prescribed by Section
422 of the Code, as from time to time amended, and any regulations implementing
such statute, including, without limitation, the requirements of Code Section
422(d) which limit the aggregate Fair Market Value of Shares for which Incentive
Stock Options are exercisable for the first time to $100,000 per calendar year.
Each provision of the Plan and of each written option agreement relating to an
Option designated as an Incentive Stock Option shall be construed so that such
Option qualifies as an Incentive Stock Option, and any provision that cannot be
so construed shall be disregarded.
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(b) EXERCISE PRICE. The Committee shall establish the exercise price at
the time each Option is granted, which price, except in the case of Options that
are Substitute Awards, shall not be less than 100% of the per Share Fair Market
Value on the date of grant. Notwithstanding any provision contained herein, in
the case of an Incentive Stock Option, the exercise price at the time such
Incentive Stock Option is granted to any Employee who, at the time of such
grant, is a Ten Percent Shareholder, shall not be less than 110% of the per
Share Fair Market Value on the date of grant.
(c) EXERCISE. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter; provided, in the case
of an Incentive Stock Option, a Participant may not exercise such Incentive
Stock Option after (i) the date which is ten years (five years in the case of a
Participant who is a Ten Percent Shareholder) after the date on which such
Incentive Stock Option is granted; or (ii) the date which is three months
(twelve months in the case of a Participant who becomes disabled, as defined in
Section 22(e)(3) of the Code, or who dies) after the date on which he ceases to
be an Employee of the Company or a Subsidiary. The Committee may impose such
conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities laws,
as it may deem necessary or advisable. The Committee shall have the right to
accelerate the exercisability of any Option or outstanding Option in its
discretion.
(d) PAYMENT. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent or, if and to the
extent permitted by the Committee, by exchanging Shares owned by the optionee
(which are not the subject of any pledge or other security interest) or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such option price.
(e) DIRECTOR OPTIONS. On March 7, 1997, each individual then serving as an
Eligible Director was granted an immediately exercisable Director Option to
purchase 2,000 Shares at an exercise price per Share equal to the Fair Market
Value on the date of grant. Notwithstanding anything else contained herein to
the contrary, each individual who is an Eligible Director on the Effective Date
shall be granted a Director Option to purchase 20,000 Shares effective on the
Effective Date. Any individual who is a newly-elected or appointed Eligible
Director after the Effective Date shall be granted a Director Option to purchase
20,000 Shares effective on the date of his appointment or election to the Board.
Each Director Option granted effective on or after the Effective Date shall be
granted at an exercise price per Share equal to the Fair Market Value on the
date of grant. Each Director Option shall vest and become exercisable as
follows: (i) with respect to 20% of the Shares covered thereby on the grant
date; and (ii) with respect to an additional 20% of the Shares covered thereby
on each of the first, second, third and fourth anniversaries of such grant date.
Once vested and exercisable, a Director Option shall remain exercisable until
the earlier to occur of the following two dates: (i) the tenth anniversary of
the date of grant of such Director Option; or (ii) three months (twelve months
in the case of an Eligible Director who becomes disabled, as defined in Section
22(e)(3) of the Code, or who dies) after the date the Eligible Director ceases
to be a member of the Board, except that if the Eligible Director ceases to be a
member of the Board after having been convicted of, or pled guilty or nolo
contendere to, a felony, his Director Option shall be canceled on the date he
ceases to be a member of the Board. An Eligible Director may pay the exercise
price of a Director Option in the manner described in Section 6(d). In the event
the Company merges with another entity and the Company is not the surviving
entity, or in the event all or substantially all of the Company's assets or
stock is acquired by another entity, each Director Option shall immediately vest
and become exercisable.
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<PAGE>
SECTION 7. RESTRICTED STOCK.
(a) GRANT. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Shares of
Restricted Stock shall be granted, the number of Shares of Restricted Stock to
be granted to each Participant, the duration of the period during which, and the
conditions under which, the Restricted Stock will vest and no longer be subject
to forfeiture to the Company and the other terms and conditions of such Awards.
The Committee shall have the right to accelerate the vesting of any Restricted
Stock or outstanding Restricted Stock in its discretion.
(b) TRANSFER RESTRICTIONS. Until the lapse of applicable restrictions,
Shares of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered except as provided in the Plan or the applicable Award
Agreements. Certificates issued in respect of Shares of Restricted Stock shall
be registered in the name of the Participant and deposited by such Participant,
together with a stock power endorsed in blank, with the Company. Upon the lapse
of the restrictions applicable to such Shares of Restricted Stock, the Company
shall deliver such certificates to the Participant or the Participant's legal
representative.
(c) PAYMENT OF DIVIDENDS. Dividends paid on any Shares of Restricted Stock
may be paid directly to the Participant, or may be reinvested in additional
Shares of Restricted Stock, as determined by the Committee in its sole
discretion.
SECTION 8. PERFORMANCE AWARDS.
(a) GRANT. The Committee shall have sole and complete authority to
determine the Employees who shall receive a Performance Award denominated in
cash or Shares; (i) valued, as determined by the Committee, in accordance with
the achievement of such performance goals during such performance periods as the
Committee shall establish; and (ii) payable at such time and in such form as the
Committee shall determine.
(b) TERMS AND CONDITIONS. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) PAYMENT OF PERFORMANCE AWARDS. Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 9. CODE SECTION 162(M) LIMITATIONS.
(a) GENERAL LIMITATIONS. Any Awards issued under this Plan to Covered
Employees must satisfy the requirements of this Section 9.
(b) REQUIREMENTS FOR ALL AWARDS. Any Award issued to a Covered Employee
shall constitute qualified performance-based compensation. For this purpose, an
Award shall constitute qualified performance-based compensation to the extent
that:
(i) it is granted by the Committee on account of the attainment of one
or more preestablished, objective performance goals established by the
Committee, in accordance with the provisions of Section 1.162-27(e)(2) of
the Final Regulations;
(ii) the material terms of the performance goal under which the Award is
issued are disclosed to and subsequently approved by the shareholders of the
Company, in accordance with the provisions of Section 1.162-27(e)(4) of the
Final Regulations; and
(iii) the Committee certifies, in writing, prior to the payment of any
compensation under the Award, that the performance goals and any other
material terms were in fact satisfied.
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(c) SPECIAL RULES FOR OPTIONS. The grant of an Option to a Covered
Employee under the Plan shall satisfy the requirements of Section 9(b)(i) above
to the extent that the following requirements are satisfied:
(i) subject to the provisions of Section 4(b), no Covered Employee shall
receive Options for more than 200,000 Shares over any one-year period. For
this purpose, to the extent that any Option is canceled (as described in
Section 1.162-27(e)(2)(vi)(B) of the Final Regulations), such canceled
Option shall continue to be counted against the maximum number of Shares for
which Options may be granted to a Covered Employee under the Plan; and
(ii) under the terms of the Option, the amount of compensation that the
Covered Employee may receive is based solely on an increase in the value of
the Shares after the grant of the Option, unless the grant of such Option is
contingent upon the attainment of a performance goal that otherwise
satisfies the requirements of Section 9(b)(i) above.
SECTION 10. STOCK PURCHASE PLAN.
(a) ELIGIBILITY. Each Employee who has at least one Year of Service on an
Offering Effective Date shall be eligible to participate in the Offering which
is applicable to such Offering Effective Date. Nothing contained herein and no
rules and regulations prescribed by the Committee shall permit or deny partici-
pation in any Offering contrary to the requirements of the Code (including,
without limitation, Sections 423(b)(3), 423(b)(4) and 423(b)(8) thereof).
Nothing contained herein and no rules and regulations prescribed by the
Committee shall permit any Participant to be granted a Right to Purchase:
(i) if, immediately after such Right to Purchase is granted, such
Participant would own, and/or hold outstanding options or rights to
purchase, shares of the Company or of any Subsidiary, possessing five
percent (5%) or more of the total combined voting power or value of all
classes of shares of the Company or such Subsidiary; or
(ii) which permits a Participant's rights to purchase Shares under all
employee stock purchase plans of the Company and of its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000.00) of
Fair Market Value of Shares (determined as of the date such Right to
Purchase is granted) for each calendar year in which such Right to Purchase
is outstanding at any time.
For purposes of clause (a)(i) above, the provisions of Section 424(d) of the
Code shall apply in determining the stock ownership of each Participant. For
purposes of clause (a)(ii) above, the provisions of Section 423(b)(8) of the
Code shall apply in determining whether a Participant's Rights to Purchase and
other rights are permitted to accrue at a rate in excess of the permitted rate.
(b) PURCHASE PRICE. The purchase price for a Share under each Offering
shall be determined by the Committee prior to the Offering Effective Date and
shall be stated as a percentage of the Fair Market Value of a Share on either
the Right to Purchase Date or the Offering Effective Date, whichever is the
lesser, but the purchase price shall not be less than the lesser of eighty-five
percent (85%) of the per share Fair Market Value of the Shares as of the
Offering Effective Date or eighty-five percent (85%) of the per share Fair
Market Value of the Shares as of the Right to Purchase Date for the Offering.
(c) PARTICIPATION IN OFFERINGS. Except as may be otherwise provided for
herein, each Employee who is eligible for and elects to participate in an
Offering shall be granted Rights to Purchase for as many Shares as he may elect
to purchase during that Offering, to be paid by payroll deductions during such
period. The Committee shall establish administrative rules and regulations
regarding the payroll deduction process for this Section 10, including, without
limitation, minimum and maximum permissible deductions; the timing for initial
elections, changes in elections and suspensions of elections during an Offering
Period; and the complete withdrawal by a Participant from an Offering. Amounts
withheld through payroll deductions under this paragraph shall be credited to
each Participant's Cash Account. Such amounts will be delivered to a custodian
for the Plan and held pending the purchase of Shares as described in paragraph
(e) of this Section 10. All amounts held in a Participant's Cash Account shall
bear interest at a
I-7
<PAGE>
rate as may be agreed upon by the Committee and the custodian of the Plan. If a
Participant withdraws entirely from an Offering (pursuant to rules established
by the Committee), his Cash Account balance will not be used to purchase Shares
on the Right to Purchase Date. Instead, the portion of the Cash Account equal to
the Participant's payroll deductions under the Plan during the Offering Period
will be refunded to the Participant without interest (notwithstanding any
provision contained herein). Such a Participant will not be eligible to
re-enroll in that Offering, but may resume participation on the Offering
Effective Date for the next Offering. In addition, the Committee may impose such
other restrictions on the right to withdraw from Offerings as it may deem
appropriate.
(d) GRANT OF RIGHTS TO PURCHASE. Rights to Purchase with respect to Shares
shall be granted to Participants who elect to participate in an Offering. Such
Rights to Purchase may be exercised on the Right to Purchase Date applicable to
the Offering. The number of Shares subject to Rights to Purchase on each Right
to Purchase Date shall not exceed the number of Shares authorized for issuance
during the applicable Offering.
(e) EXERCISE OF RIGHTS TO PURCHASE. Each Right to Purchase shall be
exercised on the applicable Right to Purchase Date. Each Participant
automatically and without any act on his part will be deemed to have exercised a
Right to Purchase on each Right to Purchase Date to purchase the number of whole
and fractional Shares which the amount in his Cash Account at that time is
sufficient to purchase at the applicable purchase price. Any remaining amount
credited to a Participant's Cash Account after such application shall remain in
such Participant's Cash Account for use in the next Offering unless withdrawn by
the Participant. The Company shall deliver to the custodian of the Plan as soon
as practicable after each Right to Purchase Date a certificate for the total
number of Shares purchased by all Participants on such Right to Purchase Date.
The custodian shall allocate the proper number of Shares to the Share Account of
each Participant. If the aggregate Cash Account balances of all Participants on
any Right to Purchase Date exceeds the amount required to purchase all of the
Shares subject to Rights to Purchase on that Right to Purchase Date, then the
Shares subject to Rights to Purchase shall be allocated pro rata among the
Participants in the proportion that the number of Shares subject to Rights to
Purchase bears to the number of Shares that could have been purchased with such
aggregate amount available, if an unlimited number of Shares were available for
purchase. Any balances remaining in Participants' Cash Accounts due to over
subscription will remain in the Participants' Cash Accounts for use in the next
Offering unless withdrawn by the Participant.
(f) WITHDRAWALS FROM SHARE ACCOUNTS AND DIVIDEND REINVESTMENT. A
Participant may withdraw the Shares credited to his Share Account on a
first-in-first-out basis. The Committee shall establish rules and regulations
governing such withdrawals. All cash dividends paid, if any, with respect to the
Shares credited to a Participant's Share Account shall be added to the
Participant's Cash Account and thereby shall be applied to exercise Rights to
Purchase for Shares on the Right to Purchase Date next succeeding the date such
cash dividends are paid by the Company. An election to leave Shares with the
custodian shall constitute an election to apply the cash dividends with respect
to such Shares to the exercise of Rights to Purchase hereunder. Shares so
purchased shall be applied to the Shares credited to each Participant's Share
Account.
(g) TERMINATION OF EMPLOYMENT. If the employment of a Participant
terminates for any reason, including death, disability, retirement or other
cause, his participation in this Section 10 of the Plan shall automatically and
without any act on his part terminate as of the date of termination of his
employment. As soon as practicable following the Participant's termination of
employment, the Company shall refund to such Participant (or beneficiary, in the
case of the Participant's death) any amount in his Cash Account which
constitutes payroll deductions, without interest, and the custodian shall
deliver to such Participant a share certificate issued in his name for the
number of whole Shares credited to his Share Account through prior Offerings.
I-8
<PAGE>
(h) EFFECT OF MERGER OR LIQUIDATION INVOLVING THE COMPANY. In the event
the Company merges with another entity and the Company is not the surviving
entity, or in the event all or substantially all of the Company's assets or
stock is acquired by another entity, the Committee may, in connection with any
such transaction, cancel each outstanding Right to Purchase and refund sums
previously collected from Participants under the canceled Rights to Purchase,
or, in its discretion, cause each Participant with outstanding Rights to
Purchase to have his or her Rights to Purchase exercised immediately prior to
such transaction and thereby the balance of his or her Cash Account applied to
the purchase of Shares at the purchase price in effect for that Offering, which
would be treated as ending with the effective date of such transaction. The
balances of the Cash Accounts not so applied shall be refunded to the
Participants. In the event of a merger in which the Company is the surviving
entity, each Participant shall be entitled to receive, for each Share as to
which such Participant's Rights to Purchase are exercised, the securities or
property that a holder of one Share was entitled to receive in connection with
the merger. To the extent that this paragraph is inconsistent with any other
provision in this Plan, this paragraph shall control.
SECTION 11. AMENDMENT AND TERMINATION.
(a) AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act for which or with which the Board deems it necessary
or desirable to qualify or comply. Notwithstanding anything to the contrary
herein, the Committee may amend the Plan, subject to any shareholder approval
required under Rule 16b-3, in such manner as may be necessary so as to have the
Plan conform with local rules and regulations in any jurisdiction outside the
United States.
(b) AMENDMENTS TO AWARDS. Subject to the provisions of Section 9, the
Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate any Award theretofore granted,
prospectively or retroactively; provided that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent of
the affected Participant, holder or beneficiary.
(c) CANCELLATION OF AWARD. Any provision of this Plan (except Section 9)
or any Award Agreement to the contrary notwithstanding, the Committee may cause
any Award granted hereunder to be canceled in consideration of the granting to
the holder of an alternative Award having a Fair Market Value equal to the Fair
Market Value of such canceled Award.
SECTION 12. GENERAL PROVISIONS.
(a) NONTRANSFERABILITY.
(i) Each Award, each Director Option and each Right to Purchase, and
each right under any Award, any Director Option or any Right to Purchase,
shall be exercisable during the Participant's or the Eligible Director's
lifetime only by the Participant or the Eligible Director or, if permissible
under applicable law, by the Participant's or the Eligible Director's
guardian or legal representative or a transferee receiving such Award,
Director Option or Right to Purchase pursuant to a qualified domestic
relations order ("QDRO"), as determined by the Committee.
(ii) No Award, Director Option or Right to Purchase that constitutes a
"derivative security," for purposes of Section 16 of the Exchange Act, may
be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant or Eligible Director otherwise than by will or
by the laws of descent and distribution or pursuant to a QDRO, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against
I-9
<PAGE>
the Company or any Subsidiary; provided that the designation of a
beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance.
(b) NO RIGHTS TO AWARDS. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(c) SHARE CERTIFICATES. All certificates for Shares or other securities of
the Company or any Subsidiary delivered under the Plan shall be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations and other requirements of the SEC, any
stock exchange or national securities association upon which such Shares or
other securities are then listed and any applicable federal or state laws; and
the Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
(d) WITHHOLDING. A Participant or Eligible Director may be required to pay
to the Company or any Subsidiary and the Company or any Subsidiary shall have
the right and is hereby authorized to withhold from any Award, Director Option
or Share otherwise issued under the Plan, from any payment due or transfer made
under any Award or any Director Option or otherwise under the Plan, or from any
compensation or other amount owing to a Participant or Eligible Director, the
amount of any applicable withholding taxes in respect of an Award, a Director
Option or a Share otherwise issued under the Plan, its exercise or any payment
or transfer under an Award, under a Director Option or otherwise under the Plan
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes. With respect to
Participants who are not subject to Section 16 of the Exchange Act, the
withholding may be in the form of cash, Shares, other securities, other Awards
or other property as the Committee may allow. With respect to Participants and
Eligible Directors who are subject to Section 16 of the Exchange Act, the
withholding shall be in cash or in any other property permitted by Rule 16b-3 as
the Committee may allow. The Committee may provide for additional cash payments
to Participants or Eligible Directors to defray or offset any tax arising from
the grant, vesting, exercise or payments of any Award or Share otherwise issued
under this Plan.
(e) AWARD AGREEMENTS. Each Award hereunder shall be evidenced by an Award
Agreement which shall be delivered to the Participant and shall specify the
terms and conditions of the Award and any rules applicable thereto, including
but not limited to the effect on such Award of the death, retirement or other
termination of employment of a Participant and the effect, if any, of a change
in control of the Company.
(f) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Subsidiary from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, shares and other types of awards provided
for hereunder (subject to shareholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only in
specific cases.
(g) NO RIGHT TO EMPLOYMENT. Eligibility for participation in this Plan or
the grant of an Award shall not be construed as giving a Participant the right
to be retained in the employ of the Company or any Subsidiary. Further, the
Company or a Subsidiary may at any time dismiss a Participant from employment,
free from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award Agreement.
(h) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the Plan and/or
the applicable Award, no Participant or holder or beneficiary of any Award,
Director Option or Right to Purchase shall have any rights as a shareholder with
respect to any Shares to be distributed under the Plan until he or she has
become the holder of such Shares. Notwithstanding the foregoing, in connection
with each grant of
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<PAGE>
Restricted Stock hereunder, the applicable Award shall specify if and to what
extent the Participant shall not be entitled to the rights of a shareholder in
respect of such Restricted Stock.
(i) GOVERNING LAW. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Ohio.
(j) SEVERABILITY. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(k) OTHER LAWS. The Committee may refuse to issue or transfer any Shares
or other consideration under the Plan if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the issuance of such Shares shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(l) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Subsidiary and a Participant or any
other Person. To the extent that any Person acquires a right to receive payments
from the Company or any Subsidiary pursuant to the Plan, such rights shall be no
greater than the right of any unsecured general creditor of the Company or any
Subsidiary.
(m) RULE 16B-3 COMPLIANCE. With respect to persons subject to Section 16
of the Exchange Act, transactions under this Plan are intended to comply with
all applicable terms and conditions of Rule 16b-3 and any successor provisions.
To the extent that any provision of the Plan or action by the Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
(n) HEADINGS. Headings are given to the sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(o) NO IMPACT ON BENEFITS. Plan Awards or Shares otherwise issued under
this Plan shall not be treated as compensation for purposes of calculating an
Employee's rights under any employee benefit plan.
(p) INDEMNIFICATION. Each person who is or shall have been a member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights
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<PAGE>
of indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Regulations, by contract, as a matter of law, or
otherwise.
SECTION 13. TERM OF THE PLAN.
(a) EFFECTIVE DATE. The AirNet Systems, Inc. 1996 Stock Incentive Plan was
effective as of May 1, 1996. The amendment and restatement of such Plan shall be
effective as of the date of its approval by the shareholders of the Company.
(b) EXPIRATION DATE. No Award or Right to Purchase shall be granted under
the Plan after May 1, 2006. Unless otherwise expressly provided for in the Plan
or in an applicable Award Agreement, any Award granted hereunder may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue or terminate any such Award or to waive any conditions or rights
under any such Award shall, continue after May 1, 2006.
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<PAGE>
REVOCABLE PROXY
AIRNET SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 19, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of AirNet Systems, Inc., an
Ohio corporation (the "Company"), hereby constitutes and appoints Gerald G.
Mercer and Eric P. Roy, and each of them, the Proxy or Proxies of the
undersigned, with full power of substitution, to attend the Annual Meeting
of Shareholders of the Company (the "Annual Meeting") to be held on August 19,
1998, at the Concourse Hotel, (change of address/comments)
4300 International Gateway, Columbus, Ohio,
at 10:00 a.m., local time, and any -----------------------------
adjournment(s) thereof, and to vote all of
the common shares of the Company which the -----------------------------
undersigned is entitled to vote at such Annual
Meeting or at any adjournment(s) thereof: -----------------------------
-----------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
- ------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF
AIRNET SYSTEMS, INC.
AUGUST 19, 1998
10:00 A.M.
CONCOURSE HOTEL
4300 INTERNATIONAL GATEWAY
COLUMBUS, OHIO
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO ELECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- -------------------------------------------------------------------------------
WITHHOLD FOR ALL
1. TO ELECT AS DIRECTORS OF FOR AUTHORITY EXCEPT
THE COMPANY ALL OF THE NOMINEES / / / / / /
LISTED TO SERVE FOR TERMS
OF ONE YEAR EACH (EXCEPT AS
MARKED TO THE CONTRARY BELOW.)*
*INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
---------------------------------------------------------------
Gerald G. Mercer
Eric P. Roy
Roger D. Blackwell
Tony C. Canonie, Jr.
Russell M. Gertmenian
J.F. Keeler, Jr.
- ----------------------------------------------------------- DATE --------------
SHAREHOLDER SIGN ABOVE -- CO-HOLDER (IF ANY) SIGN ABOVE
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE SPACE ABOVE.
2. TO APPROVE THE AMENDMENT AND FOR AGAINST ABSTAIN
RESTATEMENT OF THE AIRNET SYSTEMS, INC. / / / / / /
1996 INCENTIVE STOCK PLAN.
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS (NONE KNOWN AT THE TIME OF SOLICITATION OF THIS PROXY) AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT(S) THEREOF.
Comments/Address Change / /
ALL PROXIES PREVIOUSLY GIVEN OR EXECUTED BY THE ABOVE SIGNED ARE HEREBY
REVOKED. The above signed acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement for the August 19, 1998
meeting and the Annual Report to Shareholders for the fiscal year ended
December 31, 1997.
Please sign exactly as your name appears hereon. When common shares are
registered in two names, both shareholders should sign. When signing as
executor, administrator, trustee, guardian, attorney or agent, please give full
title as such. If shareholder is a corporation, please sign in full corporate
name by President or other authorized officer. If shareholder is a partnership
or other entity, please sign in entity name by an authorized person. (Please
note any change of address on this proxy card.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AIRNET
SYSTEMS, INC. PLEASE ACT PROMPTLY--SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
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- FOLD AND DETACH HERE -
AIRNET SYSTEMS, INC.
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE.
