<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 Section 240.14a-11(c) or Section
240.14a-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:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
AIRNET SYSTEMS, INC.
3939 INTERNATIONAL GATEWAY
COLUMBUS, OHIO 43219
MARCH 30, 1999
------------------------
Dear Fellow Shareholders:
The Annual Meeting of the Shareholders of AirNet Systems, Inc., an Ohio
corporation, will be held at 10:00 a.m., local time, on Friday, May 14, 1999, 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 five
directors, each for a term to expire at the 2000 Annual Meeting. Your Board of
Directors recommends that you vote FOR the five nominees named in the enclosed
Proxy Statement.
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 FRIDAY, MAY 14, 1999
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AirNet
Systems, Inc., an Ohio corporation, will be held on Friday, May 14, 1999, at the
Concourse Hotel, 4300 International Gateway, Columbus, Ohio, at 10:00 a.m.,
local time, for the following purposes:
1. To elect five directors, each for a term to expire at the 2000 Annual
Meeting.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
The close of business on March 22, 1999, 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
March 30, 1999
<PAGE>
AIRNET SYSTEMS, INC.
3939 INTERNATIONAL GATEWAY
COLUMBUS, OHIO 43219
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, MAY 14, 1999
This Proxy Statement is furnished to the shareholders of AirNet Systems,
Inc., an Ohio corporation, in connection with the solicitation on behalf of the
Board of Directors of AirNet of proxies for use at the Annual Meeting of
Shareholders to be held on Friday, May 14, 1999, 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 March 30, 1999, to all shareholders of AirNet.
GENERAL
Only holders of record of AirNet common shares at the close of business on
March 22, 1999 (the "Record Date"), will be entitled to vote at the Annual
Meeting. As of the Record Date, there were 11,383,409 common shares outstanding.
Each common share entitles the holder to one vote. A quorum for the Annual
Meeting is a majority of the common shares outstanding. There is no cumulative
voting. Other than the common shares, there are no voting securities of AirNet
outstanding.
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
"Withhold Authority" regarding the election of directors or they are not marked
at all. Broker/dealers, who hold their customers' 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 those common shares and may vote them on routine matters, which, under
such rules, typically include the election of directors, but broker/dealers may
not vote the 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 stock compensation plans,
without specific instructions from the customer who owns the 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. Broker non-votes will be counted for quorum purposes.
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 and
of itself, constitute revocation of the proxy.
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 will reimburse brokerage
houses and other nominees for their reasonable expenses in forwarding proxy
materials to beneficial owners of the common shares.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table sets forth the number and percentage of outstanding
common shares beneficially owned by (i) each director of AirNet; (ii) each
executive officer of AirNet included in the Summary Compensation Table; (iii)
all current directors and executive officers of AirNet as a group; and (iv) each
person known by AirNet to own beneficially more than five percent of the common
shares, in each case, as
<PAGE>
of March 22, 1999 (except as otherwise noted). The address of each of the
current executive officers and directors is c/o AirNet, 3939 International
Gateway, Columbus, Ohio 43219.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
(1)
--------------------------------------------
COMMON SHARES
WHICH CAN BE
ACQUIRED UPON
EXERCISE OF
COMMON SHARES OPTIONS
NAME OF PRESENTLY EXERCISABLE PERCENT OF
BENEFICIAL OWNER HELD WITHIN 60 DAYS TOTAL CLASS (2)
- -------------------------------------------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
Gerald G. Mercer (3).............................. 3,166,048 80,000 3,246,048 28.3%
Glenn M. Miller (3)............................... 310,333 23,000 333,333 2.9%
Eric P. Roy (3)................................... 189,975(4) 42,000 231,975 2.0%
Guy S. King (3)................................... 91,087 23,000 114,087 1.0%
William R. Sumser (3)............................. 62,002(6) 23,000 85,002 (5)
Kendall W. Wright (3)............................. 27,381(7) -- 27,381 (5)
J.F. Keeler, Jr................................... 10,185(8) 6,000 16,185 (5)
Tony C. Canonie, Jr............................... 10,000 6,000 16,000 (5)
Roger D. Blackwell................................ 7,700 6,000 13,700 (5)
Russell M. Gertmenian............................. 5,000(9) 6,000 11,000 (5)
Donald D. Strench (3)............................. 3,269 18,000 21,269 (5)
All current directors and executive officers as a
group (11 persons).............................. 3,693,005 197,000 3,890,005 33.6%
Adele Mercer...................................... 950,000 -- 950,000 8.3%
13508 M-73 Road
Montrose, CO 81401
Wellington Management Company, LLP................ 697,000(10) -- 697,000(10) 6.1%
75 State Street
Boston, MA 02109
Royce and Associates, Inc......................... 700,000(11) -- 700,000(11) 6.1%
1414 Avenue of the Americas
New York, NY 10019
Wanger Asset Management L.P....................... 675,000(12) -- 675,000(12) 5.9%
Wanger Asset Management Ltd.
227 West Monroe St., Suite 3000
Chicago, IL 60606
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all common shares reflected in the table.
(2) The percent of class is based upon the sum of (i) 11,383,409 common shares
outstanding on March 22, 1999 and (ii) the number of 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 March 22, 1999.
(3) Individual named in the Summary Compensation Table.
(4) Of these 189,975 common shares, 1,000 common shares are held of record by
each of Mr. Roy's two minor children, 80,000 common shares are held in the
Revocable Trust Created by Eric P. Roy and 80,000 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 common shares held in the trusts.
2
<PAGE>
(5) Represents ownership of less than 1% of the outstanding common shares of
AirNet.
(6) Of these 62,002 common shares, 5,000 common shares are held by Mr. Sumser's
wife,
(7) Of these 27,381 common shares, 4,829 common shares are held by Mr. Wright's
wife.
(8) Of these 10,185 common shares, 7,500 common shares are held by the Keeler
Family Limited Partnership, of which Mr. Keeler is the sole general
partner. Mr. Keeler possesses sole voting and investment power with respect
to the common shares held by the limited partnership.
(9) Of these 5,000 common shares, 2,100 common shares are held of record by Mr.
Gertmenian's wife and 500 common shares are held by Mr. Gertmenian's son.
(10) Based on information contained in filings with the SEC (the latest of
which is dated December 31, 1998), Wellington Management Company, LLP, a
registered investment advisor ("Wellington"), may be deemed to
beneficially own, as of December 31, 1998, 697,000 common shares held of
record by Wellington clients. The filing also indicates that Wellington
has shared voting power over 394,900 of these 697,000 common shares and
shared dispositive power over all 697,000 common shares.
(11) Based on information contained in filings with the SEC (the latest of
which is dated February 9, 1999), Royce & Associates, Inc., a registered
investment advisor ("Royce"), beneficially owned 700,000 common shares and
Royce Management Company, also a registered investment advisor ("RMC"),
beneficially owned 19,620 common shares, in each case as of December 31,
1998. The filing indicates that each of Royce and RMC has sole voting and
dispositive power with respect to the common shares beneficially owned by
it. Charles M. Royce may be deemed a controlling person of Royce and RMC
and as such, may be deemed to beneficially own the common shares
beneficially owned by Royce and RMC. The filing indicates that Mr. Royce
does not own any common shares outside of Royce and RMC and disclaims
beneficial ownership of the common shares held by Royce and RMC.
(12) Based on information contained in filings with the SEC (the latest of
which is dated February 23, 1999), Wanger Asset Management L.P., a
registered investment advisor ("WAM"), and its general partner Wanger
Asset Management Ltd. ("WAM LTD") beneficially owned 675,000 common shares
as of December 31, 1998 and have shared voting and dispositive power with
respect to these common shares. All of these common shares were acquired
on behalf of discretionary clients of WAM, including Acorn Investment
Trust, a registered investment company having the same address as WAM. The
filing indicates that Acorn Investment Trust beneficially owned 600,000
common shares as of December 31, 1998 and has shared voting and
dispositive power with respect to these common shares.
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations of AirNet, the Board of Directors has
set the authorized number of directors at five. Each director holds office for a
term expiring at the next Annual Meeting. The Board of Directors proposes that
the five nominees identified below be elected as directors, each for a new term
to expire at the 2000 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 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 March 22, 1999, 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.
3
<PAGE>
NOMINEES STANDING FOR ELECTION TO THE BOARD OF DIRECTORS
GERALD G. MERCER
Gerald G. Mercer has served as Chairman of the Board, President and Chief
Executive Officer of AirNet since founding the company 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.
ROGER D. BLACKWELL
Dr. Blackwell, 58, has been a director since December 1996. Dr. Blackwell is
a Professor of Marketing at The Ohio State University 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., Checkpoint Systems, Inc., Abercrombie & Fitch Co., Max & Erma's
Restaurants, Inc., Applied Industrial Technologies, Inc., Cheryl & Co.,
Worthington Foods, Inc. and The Flex-Funds. Dr. Blackwell serves on the
Compensation and Audit Committees of the AirNet Board of Directors.
TONY C. CANONIE, JR.
Mr. Canonie, 52, has been a director since June 1996. Since 1990, Mr.
Canonie has served as Chief Executive Officer of Canonie Ventures, Inc., an
advisory services and venture capital firm. He was a member and former Chapter
Chairman of the Young Presidents' Organization and is a member of the Chief
Executives Organization and the World Presidents' Organization. Mr. Canonie
serves on the Compensation Committee of the AirNet Board of Directors.
RUSSELL M. GERTMENIAN
Mr. Gertmenian, 51, has been a director 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 the firm's Executive Committee. Vorys, Sater, Seymour and
Pease LLP rendered legal services to AirNet during the 1998 fiscal year and
continues to render legal services to AirNet during the 1999 fiscal year. Mr.
Gertmenian is also a director of Liqui-Box Corporation. Mr. Gertmenian serves on
the Audit Committee of the AirNet Board of Directors.
J.F. KEELER, JR.
Mr. Keeler, 58, has been a director since June 1996. Mr. Keeler is Chairman
and Chief Executive Officer of The Fishel Company, a national utilities
construction firm, which he first joined in 1967. Mr. Keeler is also a director
of Metatec Corporation and serves on the Bank One of Ohio Board of Advisors. Mr.
Keeler serves on the Compensation and Audit Committees of the AirNet Board of
Directors.
RECOMMENDATION AND VOTE
Under Ohio law and AirNet's Code of Regulations, the five nominees for
election to the Board of Directors receiving the greatest number of votes will
be elected.
Common shares represented by the accompanying proxy card will be voted FOR
the election of the nominees named above 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 the nominee
or nominees. Common shares as to which the authority to vote is withheld and
broker non-votes will not be
4
<PAGE>
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 AS DIRECTORS.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors held five meetings during the fiscal year ended
December 31, 1998. The Board of Directors has standing Audit and Compensation
Committees. There is no standing nominating committee or committee performing
similar functions. Each incumbent 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 1998.
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 meetings during 1998.
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. The Compensation Committee also
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 executive officers or other associates.
The Compensation Committee held five meetings during 1998.
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. Directors who were not officers or associates of
AirNet ("Non-Employee Directors") are paid a quarterly fee of $3,500. In
addition, each committee member, other than the Chairman, receives a fee of
$1,500 for each committee meeting attended and the Chairman receives $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 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 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 common shares or cash, as selected by the plan administrator.
On August 19, 1998, each Non-Employee Director was granted an option to
purchase 20,000 common shares. Any individual who becomes a Non-Employee
Director in the future will automatically be granted an option to purchase
20,000 common shares effective on the date of his appointment or election. 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
specified change-in-control events. The exercise price of each option granted to
a Non-Employee Director is equal to the fair market value of the common shares
on the date of grant. Each option granted to a Non-Employee Director has a
ten-year term.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ended December 31, 1998 and 1997
and September 30, 1996 and the three months ended December 31, 1996, cash
compensation and other benefits paid or provided by AirNet to its Chief
Executive Officer and the six other most highly compensated executive officers
of AirNet (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
AWARDS
---------------
ANNUAL COMPENSATION COMMON SHARES ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION PERIOD SALARY ($) BONUS ($) OPTIONS (#) ($)
- ------------------------------------ ------------------ ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Gerald G. Mercer 12 mos 12/31/98 $ 421,619 $ 200,000 100,000 $ 5,000(1)
Chairman of the Board, 12 mos 12/31/97 410,776 -- 20,000 4,750
President and Chief 12 mos 9/30/96 706,667 593,424 40,000 4,499
Executive Officer 3 mos 12/31/96 100,000 -- -- --
Eric P. Roy (2) 12 mos 12/31/98 289,867 150,000 50,000 588,125(3)
Executive Vice 12 mos 12/31/97 282,408 -- 12,000 4,750
President and Chief 12 mos 9/30/96 181,333 157,630 20,000 56,615
Financial Officer 3 mos 12/31/96 68,750 -- -- --
Donald D. Strench (4) 12 mos 12/31/98 210,808 200,000 -- 5,000(1)
Vice President, 12 mos 12/31/97 197,885 80,000 8,000 4,750
Corporate Development 12 mos 9/30/96 78,750 43,750 10,000 --
3 mos 12/31/96 43,750 8,750 -- --
William R. Sumser 12 mos 12/31/98 210,808 30,000 -- 5,000(1)
Acting Chief Financial 12 mos 12/31/97 205,385 -- 8,000 4,750
Officer, Vice President, 12 mos 9/30/96 120,000 86,738 15,000 10,719
Finance, Controller and 3 mos 12/31/96 50,000 -- -- --
Secretary (5)
Glenn M. Miller 12 mos 12/31/98 210,808 -- -- 5,000(1)
Vice President, 12 mos 12/31/97 205,385 -- 8,000 4,750
Operations 12 mos 9/30/96 156,333 168,823 15,000 145,107
3 mos 12/31/96 50,000 -- -- --
Guy S. King 12 mos 12/31/98 210,808 -- -- 5,000(1)
Vice President, 12 mos 12/31/97 205,385 -- 8,000 4,750
Express Sales 12 mos 9/30/96 156,333 133,114 15,000 27,895
3 mos 12/31/96 50,000 -- -- --
Kendall W. Wright 12 mos 12/31/98 210,808 -- -- 5,000(1)
Vice President, 12 mos 12/31/97 205,385 -- 8,000 4,750
Bank Sales 12 mos 9/30/96 156,333 135,474 15,000 24,421
3 mos 12/31/96 50,000 -- -- 142
</TABLE>
- ------------------------
(1) "All Other Compensation" for these Named Executive Officers consists of
amounts contributed by AirNet to their accounts under the AirNet Systems,
Inc. Retirement Savings Plan (the "Savings Plan").
6
<PAGE>
(2) In December 1998, Mr. Roy resigned his positions as an executive officer and
director effective January 1, 1999.
(3) Includes $583,125 related to Mr. Roy's separation package which AirNet
accrued in December 1998, of which half was paid on January 4, 1999, with
the remainder payable in ten equal monthly installments, plus a final
payment, beginning February 1, 1999 and $5,000 contributed by AirNet to Mr.
Roy's account under the Savings Plan.
(4) Mr. Strench joined AirNet in April 1996.
(5) Mr. Sumser was appointed Acting Chief Financial Officer, effective January
1, 1999.
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of
options under the AirNet Systems, Inc. Amended and Restated 1996 Incentive Stock
Plan (the "Incentive Stock Plan") during the 1998 fiscal year to each of the
Named Executive Officers. AirNet has never granted stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK
COMMON SHARES ASSOCIATES PRICE APPRECIATION
UNDERLYING IN EXERCISE FOR OPTION TERM (1)
OPTIONS FISCAL PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -------------------------------------------------- -------------- ---------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald G. Mercer.................................. 4,020(2)(3) 1.4% $24.82 5/26/03 $ 27,566 $ 60,914
45,980(3)(4) 16.0 22.56 5/26/08 652,358 1,653,203
50,000(3)(5) 17.4 17.50 8/18/08 550,283 1,394,522
Eric P. Roy....................................... 50,000(3)(6) 17.4 22.56 5/26/08(6) 709,393 1,797,741
Donald D. Strench................................. -- -- -- -- -- --
William R. Sumser................................. -- -- -- -- -- --
Glenn M. Miller................................... -- -- -- -- -- --
Guy S. King....................................... -- -- -- -- -- --
Kendall W. Wright................................. -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The amounts reflected in this table represent assumed rates of appreciation
only. Actual realized values, if any, on option exercises will depend 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.
(2) This option was granted on May 27, 1998 and was fully vested on that date.
(3) At the discretion of the Compensation Committee, these options may have
stock-for-stock exercise and tax withholding features, which allow the
holder, in lieu of paying cash for the exercise price and any tax
withholding, to have AirNet commensurably reduce the number of common shares
which the holder would otherwise receive upon exercise of the options.
(4) This option was granted on May 27, 1998, became exercisable as to 15,980
common shares on the grant date, will become exercisable with respect to
20,000 common shares on the first anniversary of the date of grant and
10,000 common shares on the second anniversary of the date of grant.
(5) This option was granted on August 19, 1998, and will become exercisable as
to 10,000 common shares on the second anniversary of the date of grant and
20,000 common shares on each of the third and fourth anniversaries of the
date of grant.
7
<PAGE>
(6) This option was granted on May 27, 1998 and became exercisable with respect
to 10,000 common shares on the grant date. The option was to vest with
respect to the remaining 40,000 common shares in four equal annual
installments beginning on the first anniversary of the grant date; however,
upon Mr. Roy's resignation as an executive officer, the option expired as to
the unvested portion. The vested portion of the option may be exercised
until December 31, 1999.
OPTION EXERCISES AND HOLDINGS
None of the Named Executive Officers exercised options during the 1998
fiscal year. The following table sets forth information with respect to
unexercised options held as of December 31, 1998 by each of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
COMMON SHARES OPTIONS IN-THE-MONEY OPTIONS
UNDERLYING AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
OPTIONS VALUE REALIZED -------------------------- ------------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------------- --------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Gerald G. Mercer........... 0 N/A 80,000 80,000 $ 1,675 --
Eric P. Roy................ 0 N/A 42,000 40,000 1,500 --
Donald D. Strench.......... 0 N/A 18,000 0 1,000 --
William R. Sumser.......... 0 N/A 23,000 0 1,000 --
Glenn M. Miller............ 0 N/A 23,000 0 1,000 --
Guy S. King................ 0 N/A 23,000 0 1,000 --
Kendall W. Wright.......... 0 N/A 0 0 -- --
</TABLE>
- ------------------------
(1) "Value of Unexercised In-the-Money Options at Fiscal Year End" is based upon
the fair market value of the common shares on December 31, 1998 ($14.375)
less the exercise price of in-the-money options at December 31, 1998.
8
<PAGE>
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,
1998. The AirNet common shares became registered under Section 12 of the
Securities Exchange Act of 1934, as amended (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>
ANS RUSSELL 2000 NYSE TRANSPORTATION
<S> <C> <C> <C>
May-96 100 100 100
Dec-96 105.36 100.63 105.5
Dec-97 153.57 121.28 139.63
Dec-98 102.68 117.1 144.46
</TABLE>
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 EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THIS REPORT AND THE GRAPH INCLUDED UNDER "PERFORMANCE GRAPH" SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY 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. The Committee has retained outside legal counsel.
ROLE OF THE COMPENSATION COMMITTEE
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
9
<PAGE>
important to pay competitive salaries but also to make a large proportion of the
executive officers' total compensation at risk in order to cause the executive
officers to focus on both the short-term and long-term interests of AirNet's
shareholders. Therefore, bonuses (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
considered Plante & Moran's recommendations with respect to compensation for the
1998 fiscal year.
BASE SALARY
Base salary is reviewed annually and may be adjusted based on individual
performance, business unit performance and industry analysis and comparisons.
The Committee used information obtained from its compensation consultants, as
mentioned above, in setting base salaries in 1998.
Prior to AirNet's initial public offering, AirNet was treated as an S
Corporation for federal tax purposes and comparable state tax laws. As a result
of the S Corporation status, the AirNet shareholders were taxed directly on
AirNet's income, whether or not the 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 1996.
In connection with the initial public 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 S Corporation status terminated, as did the income distributions to the
shareholders. 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, and the Committee
accepted Mr. Mercer's recommendation
BONUS PLAN
Bonuses are awarded at the discretion of the Committee. In awarding Mr.
Mercer's bonus, the Committee focused on AirNet's 1997 performance and the
company's stock performance through the time of the award.
STOCK OPTIONS
The purpose of the 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 Incentive Stock Plan is 1,650,000, and the
maximum number with respect to which any of the Named Executive Officers may
receive stock options in any one year is 200,000.
During 1998, AirNet granted stock options to Mr. Mercer and Mr. Roy, the
details of which are provided in "EXECUTIVE COMPENSATION--Grants of Options."
These grants were based upon subjective analyses of each officer's function,
salary, length of service, performance and value to AirNet, with no specific
weighting given to any specific factor. Mr. Mercer and Mr. Roy were employed by
AirNet prior to the initial public offering and 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
10
<PAGE>
important to keep them incentivized to continue their performance on behalf of
AirNet and its shareholders.
SECTION 162(M) COMPLIANCE
Internal Revenue Code Section 162(m) generally prohibits AirNet from
deducting non-performance-based compensation in excess of $1,000,000 per taxable
year paid to the Chief Executive Officer and the other four most highly
compensated executives required to be named in the Proxy Statement ("Covered
Employees"). AirNet may continue to deduct compensation paid to its Covered
Employees if the payment of such compensation qualifies for an exception,
including an exception for certain performance-based compensation.
The Committee believes that Section 162(m) should not cause AirNet to be
denied a deduction for 1998 compensation paid to the Covered Employees. The
Committee will continue to work to structure components of its executive
compensation package to achieve maximum deductibility under Section 162(m) while
at the same time considering the goals of its executive compensation philosophy.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF AIRNET:
TONY C. CANONIE, JR., CHAIRMAN
ROGER D. BLACKWELL
J.F. KEELER, JR.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Tony C. Canonie, President, director and part owner of Team Canonie, Inc.,
serves as a member of the Compensation Committee of AirNet. Eric P. Roy, who
served as Executive Vice President, Chief Financial Officer, Chief Operating
Officer and director of AirNet until his resignation from those positions
effective January 1, 1999, is a part owner and sits on the Board of Directors of
Team Canonie, Inc. Neither Mr. Canonie nor Mr. Roy receives compensation from
Team Canonie, Inc. and its Board has no compensation committee.
11
<PAGE>
TRANSACTIONS WITH MANAGEMENT
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, in March, 1998,
AirNet purchased a fuel farm, located on Port Authority of Columbus land, from
Mr. Mercer for $100,000. In conjunction with the purchases, AirNet assumed Mr.
Mercer's 25-year land lease with the Port Authority, which expires on December
31, 2009. The complex has 80,000 square feet, of which AirNet utilizes 70,000
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.
On August 6, 1998, AirNet and Donald D. Strench, the Vice President,
Corporate Development of AirNet, entered into an agreement (the "Strench
Agreement") providing for the employment of Mr. Strench at an annual base salary
of not less than $210,000. The Strench Agreement is terminable by the Company
upon six months' notice. As contemplated by the Strench Agreement, on August 28,
1998, AirNet paid Mr. Strench a bonus of $200,000.
In connection with Mr. Roy's resignation from his positions as AirNet's
Executive Vice President, Chief Financial Officer and Chief Operating Officer
and as a director of AirNet, effective January 1, 1999, his severance agreement
provides for the payment of the aggregate amount of $583,125, half of which was
paid on January 4, 1999 and the remaining $291,562.50 has been and will be paid
in ten equal monthly installments, plus a final payment, beginning on February
1, 1999. The agreement with Mr. Roy contains confidentiality and noncompetition
provisions which prevent him for disclosing confidential information about
AirNet and from competing with AirNet for a period of two years.
In connection with AirNet's initial public offering in 1996, AirNet's
pre-existing shareholders, including each of the Named Executive Officers,
except Mr. Strench, and certain other executive officers of AirNet, agreed to
indemnify AirNet for any corporate level federal income taxes which might be
imposed upon AirNet for any period prior to the termination of AirNet's S
Corporation status at the time of the closing of the initial public offering in
June 1996. As an S Corporation, AirNet was not subject to federal income taxes
at the corporate level, and AirNet has no reason to believe that any such
corporate level federal taxes will be imposed for any such period.
In addition, Mr. Mercer has agreed to indemnify AirNet with respect to
certain environmental liabilities with respect to underground storage tanks on a
Michigan property formerly owned by Mr. Mercer and leased to AirNet. AirNet
ceased its operations at this property in 1988, at which time Mr. Mercer sold
the property to an unaffiliated third party. The aggregate amount of any such
liabilities is estimated by AirNet to be less than $100,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the common shares by executive officers,
directors and persons who own more than 10% of the common shares are required to
be reported to the SEC 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 year
ended December 31, 1998, all reporting requirements were complied with; except
Glenn M. Miller, an executive officer of AirNet, filed late one report covering
26 transactions and Jeffrey B. Harris, also an executive officer of AirNet,
filed late one report covering two transactions.
12
<PAGE>
INDEPENDENT AUDITORS
AirNet engaged Ernst & Young LLP as its independent auditors to audit its
consolidated financial statements for the 1998 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 1999 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 2000 ANNUAL MEETING
AirNet shareholders seeking to bring business before the 2000 Annual Meeting
of Shareholders, or to nominate candidates for election as directors at that
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 if less than 70 days'
notice or prior public disclosure of the date of the 2000 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 the notice of the date of the 2000 Annual Meeting was mailed or the
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 2000 Annual Meeting of Shareholders must be in the form specified in that
Rule and received by the Secretary of AirNet no later than December 1, 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 1999 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
A copy of AirNet's 1998 Annual Report to Shareholders is being mailed
herewith.
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.
13
<PAGE>
REVOCABLE PROXY
AIRNET SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1999
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 the Proxy 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 May 14, 1999, 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.
MAY 14, 1999
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 PROPOSAL 1.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
- -------------------------------------------------------------------------------
WITHHOLD
1. TO ELECT AS DIRECTORS OF FOR AUTHORITY
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
"WITHHOLD AUTHORITY" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
---------------------------------------------------------------
Gerald G. Mercer
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. IN HIS DISCRETION, THE PROXY IS 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 May 14, 1999
meeting and the Annual Report to Shareholders for the fiscal year ended
December 31, 1998.
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
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
AIRNET SYSTEMS, INC.
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE.
