<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
Willis Lease Finance Corporation
- --------------------------------------------------------------------------------
(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>
WILLIS LEASE FINANCE CORPORATION
----------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1999
---------------------
To our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of WILLIS LEASE FINANCE CORPORATION (the "Company"), which will be held at the
Embassy Suites Hotel, 250 Gateway Boulevard, South San Francisco, California at
2:00 p.m. on May 25, 1999, for the following purposes:
1. To elect two Class I Directors to serve until the 2002 Annual Meeting of
Stockholders;
2. To consider a proposal to amend the Company's 1996 Stock Option/ Stock
Issuance Plan (the "1996 Plan") to incorporate into the 1996 Plan the
Salary Investment Option Grant and Director Fee Option Grant Programs and
to change the annual option grant to non-employee Board members under the
Automatic Option Grant Program from an option to purchase a fixed number
of shares to an option for a fixed value based upon a Black-Scholes
option valuation.
3. To ratify the selection of KPMG LLP as independent public accountants
for the Company for the fiscal year ending December 31, 1999; and
4. To act upon such other business as may properly come before the meeting
or any adjournment or postponement thereof. These matters are more fully
described in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 6, 1999 as
the record date for determining those stockholders who will be entitled to
notice of and to vote at the meeting. The stock transfer books will not be
closed between the record date and the date of the meeting.
A quorum comprising the holders of the majority of the outstanding shares of
Common Stock of the Company on the record date must be present or represented
for the transaction of business at the 1999 Annual Meeting of Stockholders.
Accordingly, it is important that your shares be represented at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, to ensure that
your shares will be voted at the 1999 Annual Meeting of Stockholders. Your proxy
may be revoked at any time prior to the time it is voted.
Please read the proxy material carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
Sincerely yours,
[SIGNATURE]
Charles F. Willis, IV
CHAIRMAN OF THE BOARD
April 23, 1999
Sausalito, California
<PAGE>
WILLIS LEASE FINANCE CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SOLICITATION AND VOTING OF PROXIES......................................................................... 1
INFORMATION ABOUT THE BOARD OF DIRECTORS AND THE COMMITTEES OF THE BOARD................................... 2
PROPOSAL 1 ELECTION OF CLASS I DIRECTORS................................................................... 5
PROPOSAL 2 AMENDMENTS TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN......................................... 5
PROPOSAL 3 RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS..................................... 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 14
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934....................................... 15
REPORT OF THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION.................. 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION................................................ 17
EXECUTIVE COMPENSATION AND RELATED INFORMATION............................................................. 18
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS........................... 20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 20
STOCK PERFORMANCE GRAPH.................................................................................... 21
STOCKHOLDER PROPOSALS...................................................................................... 21
OTHER MATTERS.............................................................................................. 21
INCORPORATION BY REFERENCE................................................................................. 22
</TABLE>
<PAGE>
STOCKHOLDERS SHOULD READ THE ENTIRE PROXY
STATEMENT CAREFULLY PRIOR TO RETURNING THEIR PROXIES
------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
OF
WILLIS LEASE FINANCE CORPORATION
TO BE HELD ON MAY 25, 1999
---------------------
SOLICITATION AND VOTING OF PROXIES
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of WILLIS LEASE FINANCE CORPORATION (the "Company") of
proxies to be voted at the 1999 Annual Meeting of Stockholders, which will be
held at 2:00 p.m. on May 25, 1999 at the Embassy Suites Hotel, 250 Gateway
Boulevard, South San Francisco, California, or at any adjournments or
postponements thereof, for the purposes set forth in the accompanying Notice of
1999 Annual Meeting of Stockholders.
The Company's principal executive offices are located at 2320 Marinship Way,
Suite 300, Sausalito, California 94965. This Proxy Statement is first being
mailed to stockholders on or about April 23, 1999. The Company's 1999 Annual
Report is being mailed to stockholders concurrently with this Proxy Statement.
The 1999 Annual Report is not to be regarded as proxy soliciting material or as
a communication by means of which any solicitation of proxies is to be made.
VOTING
The close of business on April 6, 1999 is the record date for stockholders
entitled to notice of and to vote at the 1999 Annual Meeting of Stockholders. As
of that date, the Company had 7,370,645 shares of Common Stock, $.01 par value
(the "Common Stock") issued and outstanding. All of the shares of the Company's
Common Stock outstanding on the record date are entitled to vote at the 1999
Annual Meeting of Stockholders, and stockholders of record entitled to vote at
the meeting will have one vote for each share of Common Stock so held with
regard to each matter to be voted upon.
The required quorum for the meeting is a majority of the outstanding shares
of Common Stock eligible to be voted on the matters to be considered at the
meeting. In the election for directors, the two (2) nominees for Class I
receiving the highest number of affirmative votes will be elected. The
affirmative vote of a majority of the outstanding voting shares of the Company
present or represented and entitled to vote at the 1999 Annual Meeting of
Stockholders is required for the approval of the proposed amendments to the
Company's 1996 Stock Option/Stock Issuance Plan (the "1996 Plan") and the
ratification of the selection of KPMG LLP as independent public accountants.
Shares of the Company's Common Stock represented by proxies in the
accompanying proxy card which are properly executed and returned to the Company
will be voted at the 1999 Annual Meeting of Stockholders in accordance with the
stockholders' instructions contained therein. If no instructions are marked on
the proxy card, the shares represented thereby will be voted (i) for the
election of the Board's nominees as Class I Directors (Proposal 1), (ii) for the
amendments to the 1996 Plan (Proposal 2), and (iii) for ratification of the
selection of KPMG LLP as independent public accountants for the Company for the
fiscal year ending December 31, 1999 (Proposal 3). If a properly signed proxy or
ballot indicates that a shareholder, broker or other nominee abstains from
voting or that the shares are not to be voted on a particular proposal, the
shares will not be counted as having been voted on that proposal, although such
<PAGE>
shares will be counted as being in attendance at the meeting for purposes of
determining the presence of a quorum.
Management does not know of any matters to be presented at the 1999 Annual
Meeting of Stockholders other than those set forth in this Proxy Statement and
in the Notice accompanying this Proxy Statement. If other matters should
properly come before the meeting, the proxy holders will vote on such matters in
accordance with their best judgment.
REVOCABILITY OF PROXIES
Any shareholder giving a proxy in the form accompanying this Proxy Statement
has the right to revoke it at any time before it is voted at the meeting. It may
be revoked by filing with the Secretary of the Company an instrument of
revocation or by the presentation at the meeting of a duly executed proxy
bearing a later date. It may also be revoked by attendance at the meeting and
election to vote in person.
SOLICITATION
The entire cost of preparing, assembling and mailing the Notice of 1999
Annual Meeting of Stockholders, this Proxy Statement and the enclosed proxy
card, and of soliciting proxies, will be paid by the Company. Proxies will be
solicited principally through the use of the mails, but, if deemed desirable,
may be solicited personally or by telephone, telegraph or special letter by
officers and regular Company employees for no additional compensation.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to the beneficial owners of
the Company's Common Stock, and such persons may be reimbursed for their
expenses.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND THE COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
The Bylaws of the Company provide that the authorized number of Directors of
the Corporation is five (5). At the present time, the Board consists of five (5)
Directors who are divided into three (3) classes: Class I (two Directors), Class
II (two Directors) and Class III (one Director). One class is elected each year
for a three-year term.
The business, property and affairs of the Company are managed under the
direction of the Board. Directors are kept informed of the Company's business
through discussions with the Chief Executive Officer and President and other
officers of the Company, by reviewing materials provided to them and by
participating in meetings of the Board and its committees. The Board of
Directors of the Company held a total of seven (7) meetings during the fiscal
year ended December 31, 1998 (the "1998 fiscal year"). Each incumbent director
whose term of office will continue after the 1999 Annual Meeting of Stockholders
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board and (ii) the total number of meetings held by all Committees of the
Board on which he served.
COMMITTEES OF THE BOARD
The Company has an Audit Committee and a Compensation Committee of the Board
of Directors, both comprised solely of non-employee directors. There is no
nominating committee or committee performing the functions of such committee.
The Audit Committee meets with the Company's financial management and its
independent public accountants to review internal financial information, audit
plans and results, and financial reporting procedures. During the 1998 fiscal
year, this Committee consisted of Directors William M. LeRoy, Chairman and
Willard H. Smith, Jr. This Committee held one (1) meeting during the 1998 fiscal
year. As of March 30, 1999, the Board of Directors authorized a change in the
Audit Committee and the Audit
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Committee currently consists of the following non-employee Directors: William M.
LeRoy, Chairman, Donald E. Moffitt and Robert H. Rau.
The Compensation Committee reviews and approves the Company's compensation
arrangements for senior management and administers the 1996 Plan. During the
1998 fiscal year, this Committee consisted of Directors Willard H. Smith, Jr.
Chairman and William M. LeRoy. This Committee held nine (9) meetings during the
1998 fiscal year. As of March 30, 1999, the Board of Directors authorized a
change in the Compensation Committee and the Compensation Committee currently
consists of the following non-employee directors: Robert H. Rau, Chairman,
Donald E. Moffitt and Willard H. Smith, Jr.
DIRECTOR COMPENSATION
In fiscal year 1998, non-employee members of the Board were each paid an
annual fee of $10,000. Effective January 1, 1999, the annual fee has been
increased to $12,500. Each non-employee member of the Board was also reimbursed
for all reasonable out-of-pocket costs incurred to attend Board of Directors or
Committee meetings. In addition, each non-employee member of the Board receives
$1,000 for each Board meeting and $500 for each Committee meeting which he
attends in person, and $500 and $250, respectively, for each Board and Committee
meeting held by telephone. Pursuant to the Automatic Option Grant program under
the 1996 Stock Option/Stock Issuance Plan (the "Plan"), each individual who
first becomes a non-employee Board member is eligible to receive an option grant
for 5,000 shares of Common Stock. In addition, subject to the changes set forth
in Proposal 2, on the date of each annual stockholders meeting, beginning with
the 1997 Annual Meeting of Stockholders, each individual who is to continue to
serve as a non-employee Board member, whether or not such individual is standing
for re-election at that particular annual meeting, will be granted an option to
purchase 1,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six months. Each grant under the
Automatic Option Grant Program will have an exercise price per share equal to
the fair market value per share of the Company's Common Stock on the grant date,
and will have a maximum term of 10 years, subject to earlier termination should
the optionee cease to serve as a member of the Company's Board of Directors.
Each 5,000-share option grant vests in a series of four successive equal
annual installments over the optionee's period of continued service as a Board
member measured from the option grant date. Each 1,000-share option grant vests
in one installment upon the optionee's completion of one year of Board service
measured from the grant date. Please see the description of the Automatic Option
Grant Program under Proposal 2 for further information concerning the remaining
terms and conditions of these automatic option grants.
BIOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
CLASS I DIRECTORS WHOSE TERMS EXPIRE DIRECTOR AGE
AT THE ANNUAL MEETING: SINCE *
- ------------------------------------------------------------------------------ --------- ---
<S> <C> <C>
William M. LeRoy.............................................................. 1996 56
Robert H. Rau................................................................. 1998 62
CLASS II DIRECTORS WHOSE TERMS EXPIRE
AT THE 2000 ANNUAL MEETING:
- ------------------------------------------------------------------------------
Willard H. Smith, Jr. ........................................................ 1996 62
Donald E. Moffitt............................................................. 1998 66
CLASS III DIRECTORS WHOSE TERMS EXPIRE
AT THE 2001 ANNUAL MEETING:
- ------------------------------------------------------------------------------
Charles F. Willis, IV......................................................... 1996 50
</TABLE>
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* Age listed as of April 6, 1999
3
<PAGE>
PRINCIPAL OCCUPATIONS OF NOMINEES AND CONTINUING DIRECTORS
DURING THE LAST FIVE YEARS
Charles F. Willis, IV is the founder of the Company, has served as Chief
Executive Officer, President and a Director since its incorporation in 1985 and
has served as Chairman of the Board of Directors since 1996. Mr. Willis has 31
years of experience in the aviation industry. He has provided a wide range of
consulting services to the aviation industry, including fleet planning, cost of
re-certification estimation, assistance with purchase and lease documentation,
appraisal of competing equipment and evaluation of financing proposals. From
1975 to 1985, Mr. Willis served as president of the Company's predecessor,
Charles F. Willis Company, which purchased, financed and/or sold a variety of
large commercial transport aircraft and provided consulting services to the
aviation industry. During 1974, Mr. Willis operated a small business not
involved in the aviation industry. From 1972 through 1973, Mr. Willis was
Assistant Vice President of Sales at Seaboard World Airlines, a freight carrier.
From 1965 through 1972, he held various positions at Alaska Airlines, including
positions in the departments of flight operations, sales and marketing.
William M. LeRoy has served as a Director of the Company since 1996. In
1993, Mr. LeRoy established the LeRoy Accountancy Corporation, an audit firm
specializing in the audits of employee benefit plans and in July, 1998 merged
this firm into BDO Seidman, LLP where Mr. LeRoy is now a partner. From 1965 to
1993, Mr. LeRoy served in various positions at Ernst & Young LLP, an independent
accounting firm, in the Chicago, San Jose and San Francisco offices including as
audit partner responsible for the financial institution and leasing company
practice in northern California. Mr. LeRoy received his M.B.A. from Golden Gate
University and his B.S. in Accounting from Northern Illinois University.
Donald E. Moffitt became a Director of the Company in November of 1998. Mr.
Moffitt is presently the Chairman of CNF Transportation Inc., formerly
Consolidated Freightways, Inc. For 44 years, through April 1998, Mr. Moffitt was
employed with CNF Transportation, where he served as Chairman and C.E.O. at the
time of his retirement. Mr. Moffitt is also Vice Chairman Western Region for the
U.S. Chamber of Commerce and a member of its Executive Committee; a member of
the Board of Directors of the American Red Cross, the Bay Area Council, the
California Business Roundtable, the Conference Board and the Business Advisory
Council of the Northwestern University Transportation Center. He also serves on
the Board of the San Francisco Bay Area Council of the Boy Scouts of America,
and is a member of the Board of Trustees of the Automotive Safety Foundation and
the National Commission Against Drunk Driving. Mr. Moffitt attended Indiana
State University and was awarded an honorary doctorate of law degree from the
University in 1987. He is a graduate of the Advanced Management Program at the
Harvard University Graduate School of Business and of the School of
Transportation at Northwestern University.
Robert H. Rau became a Director of the Company in November of 1998. From
1993 to 1997 Mr. Rau served as President and CEO of Rohr, Inc., the world's
largest provider of engine nacelle systems for commercial aircraft. Following
the merger of Rohr into BF Goodrich in November 1997, Mr. Rau served as
President of the Aerostructures Group of BF Goodrich until his retirement on
December 31, 1998. Mr. Rau worked for Parker-Hannifin from 1969 to 1993. When he
left Parker-Hannifin he was Executive Vice President and President of the
Aerospace Sector, a position he held for ten years. Mr. Rau is also a member of
the Board of BF Goodrich, Inc., Primex Technologies, Inc. and HCC Industries
Inc. Mr. Rau is a past Chairman of the General Aviation Manufacturers
Association and a past member of the Board of Governors of the Aerospace
Industries Association and a member of its Executive Committee. Mr. Rau is a
graduate of Whittier College and a member of the Board of Trustees of Whittier
College.
Willard H. Smith, Jr. has served as a Director of the Company since 1996.
From 1979 through 1995, Mr. Smith was employed at Merrill Lynch, Pierce Fenner &
Smith Incorporated ("Merrill Lynch") and served as Managing Director since 1983
in their Equity Capital Markets Division. From 1992 through 1995, Mr. Smith's
primary focus was the real estate investment trust industry. His duties as
Managing Director at
4
<PAGE>
Merrill Lynch included evaluating companies' structure and equity requirements,
coordinating the placement of equity offerings with Merrill Lynch's retail and
institutional client base, and assessing the market's demand for potential
offerings. Mr. Smith is also a Board member of the Cohen & Steers Realty Shares,
the Cohen & Steers Realty Income Fund, the Cohen & Steers Total Return Realty
Fund, the Cohen & Steers Special Equity Fund, Inc., the Cohen & Steers Equity
Income Fund, Essex Property Trust, Inc., Highwoods Properties, Inc. and Realty
Income Corporation. Prior to joining Merrill Lynch, Mr. Smith worked at F.
Eberstadt & Co. from 1971 to 1979. Mr. Smith received his B.S. in Business
Administration, and B.S. in Industrial Engineering from the University of North
Dakota in 1959 and 1960, respectively.
PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
The Board of Directors is divided into three (3) classes, each having three
year terms that expire in successive years. At this year's Annual Meeting, two
Directors will be elected in Class I, each to serve a three-year term expiring
at the Annual Meeting in the year 2002 or until the individual is succeeded by
another qualified director who has been duly elected.
The nominees for Director in Class I are WILLIAM M. LEROY and ROBERT H. RAU.
The proxy holders intend to vote all proxies received by them for the
foregoing nominees, unless instructions to the contrary are marked on the proxy.
In the event that a nominee is unable or declines to serve as a Director at the
time of the 1999 Annual Meeting of Stockholders, the proxies will be voted for
any nominee who shall be designated by the present Board of Directors to fill
the vacancy. As of the date of this Proxy Statement, the Board of Directors is
not aware of any nominee who is unable or will decline to serve as a director.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE TWO NOMINEES AS CLASS I DIRECTORS.
PROPOSAL 2
AMENDMENTS TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve a series of amendments
to the Company's 1996 Stock Option/Stock Issuance Plan (the "1996 Plan") that
will effect the following changes: (i) incorporate the Salary Investment Option
Grant and Director Fee Option Grant Programs into the 1996 Plan and (ii) change
the calculation of the number of shares of common stock for which continuing
non-employee Board members are to be automatically granted stock options at each
Annual Stockholder's Meeting, beginning with the 1999 Annual Meeting, from a
fixed 1,000 shares per non-employee Board member to a grant worth $20,000 based
upon a Black-Scholes option valuation, with the number of shares subject to each
such automatic grant not to exceed 5,000 shares.
Incorporating the Salary Investment Option Grant and Director Fee Option
Grant Programs into the 1996 plan will encourage executives and other highly
compensated employees and non-employee Board members to invest in an equity
position in the Company on a tax favored basis. The change in the calculation of
the number of shares subject to the annual option grants made to the
non-employee Board members will allow the Company to provide a more meaningful
equity incentive to attract and retain highly qualified individuals to serve as
non-employee Board members.
The amendments to the 1996 Plan were adopted by the Board as of April 8,
1999. The following is a summary of the principal features of the 1996 Plan, as
most recently amended. However, the summary does not purport to be a complete
description of all the provisions of the 1996 Plan. Any shareholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Chief Financial Officer at the Company's principal
executive offices in Sausalito, California.
5
<PAGE>
EQUITY INCENTIVE PROGRAMS
The 1996 Plan contains five (5) separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) a Salary Investment Option Grant
Program, (iii) an Automatic Option Grant Program, (iv) a Stock Issuance Program,
and (v) a Director Fee Option Grant Program. The principal features of these
programs are described below. The 1996 Plan (other than the Automatic Option
Grant Program) is administered by the Compensation Committee of the Board. The
Compensation Committee acting in such administrative capacity (the "Plan
Administrator") has complete discretion (subject to the provisions of the 1996
Plan) to authorize option grants and direct stock issuances under the 1996 Plan.
Pursuant to provisions in the 1996 Plan, the Board may appoint a secondary
committee of one or more Board members, including employee directors, to
authorize option grants and direct stock issuances to eligible persons other
than executive officers and Board members subject to the short-swing liability
provisions of the federal securities laws. The Compensation Committee shall have
the exclusive authority to determine which Section 16 insiders and other highly
compensated individuals will be eligible to participate in the Salary Investment
Option Grant Program for one or more calendar years, but no administrative
discretion will be exercised by the Compensation Committee with respect to the
grants made under the Automatic Option Grant, Salary Investment Option Grant and
Director Fee Option Grant Programs. All grants under the Automatic Option Grant,
Salary Investment Option Grant and Director Fee Option Grant Programs will be
made in strict compliance with the express provisions of each program.
SHARE RESERVE
A total of 1,025,000 shares of Common Stock has been reserved for issuance
over the term of the 1996 Plan. In no event may any one participant in the 1996
Plan be granted stock options and direct stock issuances for more than 250,000
shares in the aggregate per calendar year under the 1996 Plan.
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and class of securities issuable under the 1996
Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options, separately exercisable stock
appreciation rights, and direct stock issuances under the 1996 Plan per calendar
year, (iii) the number and class of securities for which option grants will
subsequently be made under the Automatic Option Grant Program to each
newly-elected or continuing non-employee Board member, and (iv) the number and
class of securities and the exercise price per share in effect under each
outstanding option.
Should an option expire or terminate for any reason prior to exercise in
full or be canceled in accordance with the provisions of the 1996 Plan, the
shares subject to the portion of the option not so exercised or canceled will be
available for subsequent issuance under the 1996 Plan. Unvested shares issued
under the 1996 Plan and subsequently repurchased by the Company at the original
option exercise or direct issue price paid per share will also be added back to
the share reserve and will accordingly be available for subsequent issuance
under the 1996 Plan. Shares subject to any option surrendered in accordance with
the stock appreciation right provisions of the 1996 Plan will not be available
for subsequent issuance.
ELIGIBILITY
Employees of the Company or any parent or subsidiary, non-employee members
of the Board or the board of directors of any parent or subsidiary corporation,
and consultants and other independent advisors in the service of the Company or
its parent or subsidiary corporations are eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Only employees who are
Section 16 insiders or other highly compensated individuals will be eligible to
participate in the Salary Investment Option Grant
6
<PAGE>
Program. Non-employee members of the Board are also eligible to participate in
the Automatic Option Grant and Director Fee Option Grant Programs.
On April 1, 1999, seven (7) executive officers, four (4) non-employee Board
members and eighteen (18) other employees were eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs, and the four (4)
non-employee Board members were also eligible to participate in the Automatic
Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1996 Plan is the closing selling price per share on that date on the Nasdaq
National Market. On April 1, 1999, the closing selling price per share was
$17.750.
DISCRETIONARY OPTION GRANT PROGRAM
Options granted under the Discretionary Option Grant Program will have an
exercise price per share not less than the fair market value per share of Common
Stock on the option grant date. No granted option will have a term in excess of
ten (10) years. The options generally become exercisable in a series of
installments over the optionee's period of service with the Company.
Upon cessation of service, the optionee has a limited period of time in
which to exercise his or her outstanding options for any shares in which the
option is exercisable at the time of optionee's termination of service. The Plan
Administrator has complete discretion to extend the period following the
optionee's cessation of service during which his or her outstanding options may
be exercised and/or to accelerate the exercisability or vesting of such options
in whole or in part. Such discretion may be exercised at any time while the
options remain outstanding, whether before or after the optionee's actual
cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company equal
in amount to the excess of (a) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (b) the aggregate exercise
price payable for those shares. Such appreciation distribution may, at the
discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
Limited stock appreciation rights may be provided to one or more
non-employee Board members or officers of the Company as part of their option
grants. Any option with such a limited stock appreciation right may be
surrendered to the Company upon the successful completion of a hostile tender
offer for more than fifty percent (50%) of the Company's outstanding voting
stock. In return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option share
equal to the excess of (a) the highest price paid per share of Common Stock in
connection with the tender offer over (b) the exercise price payable for such
share.
The shares of Common Stock acquired upon the exercise of one or more options
may be unvested and subject to repurchase by the Company, at the original
exercise price paid per share, if the optionee ceases service with the Company
prior to vesting in those shares. The Plan Administrator has complete discretion
to establish the vesting schedule to be in effect for any such unvested shares
and, in certain circumstances, may cancel the Company's outstanding repurchase
rights with respect to those shares and thereby accelerate the vesting of those
shares.
The Plan Administrator also has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program and to issue
replacement options with an exercise price based on the fair market price of
Common Stock at the time of the new grant.
7
<PAGE>
SALARY INVESTMENT OPTION GRANT PROGRAM
In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer and
other highly compensated employees of the Company selected for participation may
elect, prior to the start of the calendar year, to reduce his or her base salary
for that calendar year by a specified dollar amount not less than $10,000 nor
more than $50,000. If such election is approved by the Plan Administrator, the
individual will automatically be granted, on the first trading day in January of
the calendar year for which that salary reduction is to be in effect (or the
first trading day of the month following the adoption and implementation of this
program if it is implemented within calendar year 1999), a non-statutory option
to purchase that number of shares of Common Stock determined by dividing the
salary reduction amount by two-thirds of the fair market value per share of
Common Stock on the grant date. The option will be exercisable at a price per
share equal to one-third of the fair market value of the option shares on the
grant date. As a result, the total spread on the option shares at the time of
grant (the fair market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be equal to the amount
of salary invested in that option. The option will vest and become exercisable
in a series of twelve (12) equal monthly installments over the calendar year for
which the salary reduction is to be in effect and will be subject to full and
immediate vesting upon certain changes in the ownership or control of the
Company.
The shares subject to each option under the Salary Investment Option Program
will immediately vest upon (i) an acquisition of the Company by merger or asset
sale or (ii) the successful completion of a tender offer for more than 50% of
the Company's outstanding voting stock or a change in the majority of the Board
effected through one or more contested elections for Board membership.
Limited stock appreciation rights will automatically be included as part of
each grant made under the Salary Investment Option Grant Program. Options with
such a limited stock appreciation right may be surrendered to the Company upon
the successful completion of a hostile tender offer for more than 50% of the
Company's outstanding voting stock. In return for the surrendered option, the
optionee will be entitled to a cash distribution from the Company in an amount
per surrendered option share equal to the excess of (i) the highest price per
share of Common Stock paid in connection with the tender offer over (ii) the
exercise price payable for such share.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who was serving as
a non-employee Board member on September 18, 1996 was granted at that time a
non-statutory option to purchase 5,000 shares of Common Stock, provided such
individual had not previously been in the Company's employ and had not otherwise
received a stock option grant from the Company. Each individual who first
becomes a non-employee Board member after September 18, 1996, whether through
election by the stockholders or appointment by the Board, will automatically be
granted, at the time of such initial election or appointment, a non-statutory
option to purchase 5,000 shares of Common Stock, provided such individual has
not previously been in the employ of the Company or any parent or subsidiary
corporation. In addition, on the date of each Annual Meeting, each individual
who continues to serve as a non-employee Board member, whether or not that
individual is standing for re-election to the Board at that particular Annual
Meeting, will automatically be granted a non-statutory option to purchase a
specified number of shares of the Company's Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. The number of shares of Common Stock subject to each such annual
automatic option grant will be determined by dividing $20,000 by the
Black-Scholes formula value of the option, as determined by the Company's
independent financial advisors. However, in no event may such option grant
exceed 5,000 shares of Common Stock. There will be no limit on the number of
such annual option grants that any one non-employee Board member may receive
over his or her period of Board service.
8
<PAGE>
Each initial 5,000-share or annual $20,000-value option granted under the
Automatic Option Grant Program will have an exercise price per share equal to
one hundred percent (100%) of the fair market value per share of Common Stock on
the option grant date and a maximum term of ten (10) years measured from the
grant date, subject to earlier termination at the end of the twelve (12)-month
period measured from the date of the optionee's cessation of Board service. Each
initial 5,000-share or annual $20,000-value option is immediately exercisable
for all the option shares. However, any shares purchased under the option will
be subject to repurchase by the Company, at the option exercise price paid per
share, upon the optionee's cessation of Board service prior to vesting in those
shares. The shares subject to each initial 5,000-share automatic option grant
vest in a series of four (4) successive equal annual installments upon the
optionee's completion of each year of Board service over the four (4)-year
period measured from the grant date. The shares subject to each annual
$20,000-value grant vest upon the optionee's completion of one (1) year of Board
service measured from the grant date. Should the optionee cease to serve as a
Board member, the optionee will generally have until the earlier of (i) the
twelve (12) month period following such cessation of service or (ii) the
expiration date of the option term in which to exercise the option for the
number of shares that are vested at the time of such individual's cessation of
Board service.
The shares subject to each automatic option grant will immediately vest in
full upon (i) the optionee's death or permanent disability while a Board member,
(ii) an acquisition of the Company by merger or asset sale, (iii) the successful
completion of a tender offer for more than fifty percent (50%) of the Company's
outstanding voting stock or (iv) a change in the majority of the Board effected
through one or more proxy contests for Board membership. In addition, upon the
successful completion of a hostile tender offer for more than fifty percent
(50%) of the Company's outstanding voting stock, each automatic option grant may
be surrendered to the Company for a cash distribution per surrendered option
share in an amount equal to the excess of (a) the highest price per share of
Common Stock paid in connection with such tender offer over (b) the exercise
price payable for such share. Shareholder approval of this Proposal will also
constitute pre-approval of each option granted on or after the date of the
Annual Meeting with such a surrender right and the subsequent surrender of that
option in accordance with foregoing provisions.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share not
less than the fair market value on the issuance date, payable in cash or through
a promissory note payable to the Company. Shares may also be issued solely as a
bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator, however, has the discretionary
authority at any time to accelerate the vesting of any and all unvested shares
outstanding under the 1996 Plan.
DIRECTOR FEE OPTION GRANT PROGRAM
In the event the Plan Administrator elects to activate the Director Fee
Option Grant Program for one or more calendar years (including the current
calendar year) under the Director Fee Option Grant Program each non-employee
Board member will have the opportunity to elect to apply all or a portion of any
annual retainer fee and attendance fees otherwise payable in cash to the
acquisition of a below-market option grant. Such election must be made prior to
the start of the calendar year to which the election applies, or, if the Program
is implemented for calendar year 1999, the election may only be made with
respect to retainer fees and attendance fees not yet earned by the non-employee
Board member. The option grant will automatically be made at the end of each
fiscal quarter in the year for which the retainer fee and attendance fees would
otherwise be payable in cash. The option will have an exercise price per share
equal to one-third of the fair market value of the option shares on the grant
date, and the number of shares subject to the option will be determined by
dividing the applicable quarterly amount of the retainer
9
<PAGE>
fee plus the applicable amount of any attendance fees earned during the quarter
applied to the program by two-thirds of the fair market value per share of
Common Stock on the grant date. As a result, the total spread on the option (the
fair market value of the option shares on the grant date less the aggregate
exercise price payable for those shares) will be equal to the portion of the
retainer fee plus the attendance fees invested in that option. The option will
be fully vested at the time of grant.
Limited stock appreciation rights will automatically be included as part of
each grant made under the Director Fee Option Grant Program. Options with such a
limited stock appreciation right may be surrendered to the Company upon the
successful completion of a hostile tender offer for more than 50% of the
Company's outstanding voting stock. In return for the surrendered option, the
optionee will be entitled to a cash distribution from the Company in an amount
per surrendered option share equal to the excess of (i) the highest price per
share of Common Stock paid in connection with the tender offer over (ii) the
exercise price payable for such share.
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation will automatically accelerate in full,
and all unvested shares under the Discretionary Option Grant and Stock Issuance
Programs will immediately vest, except to the extent the Company's repurchase
rights with respect to those shares are to be assigned to the successor
corporation. Any options assumed in connection with such acquisition may, in the
Plan Administrator's discretion, be subject to immediate acceleration, and any
unvested shares which do not vest at the time of such acquisition may be subject
to full and immediate vesting, in the event the individual's service with the
successor entity is subsequently terminated within a twelve (12) months
following the acquisition. In connection with a change in control of the Company
(whether by successful tender offer for more than fifty percent (50%) of the
outstanding voting stock or a change in the majority of the Board by one or more
contested elections for Board membership), the Plan Administrator will have the
discretionary authority to provide for automatic acceleration of outstanding
options under the Discretionary Option Grant Program and the automatic vesting
of all unvested shares outstanding under the Discretionary Option Grant and
Stock Issuance Programs, with such acceleration or vesting to occur either at
the time of such change in control or upon the subsequent termination of the
individual's service. Each option outstanding under the Automatic Option Grant,
Director Fee Option Grant and Salary Investment Option Grant Programs will
automatically accelerate in full upon an acquisition or change in control of the
Company.
The acceleration of vesting upon a change in the ownership or control of the
Company may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase of
shares under the Discretionary Option Grant and Stock Issuance Programs. The
Plan Administrator has complete discretion to determine the terms of any such
financial assistance. However, any such financing will be full-recourse and
interest bearing. In addition, the maximum amount of financing provided any
individual may not exceed the cash consideration payable for the issued shares
plus all applicable taxes.
10
<PAGE>
STOCK AWARDS
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the 1996 Plan between the June 21, 1996 Effective Date, and April 1, 1999,
together with the weighted average exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME (NUMBER OF SHARES) EXERCISE PRICE
- ---------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Charles F. Willis IV........................................................ 40,000 14.00
James D. McBride............................................................ 60,000 16.75
Donald A. Nunemaker......................................................... 60,000 14.38
Edwin F. Dibble............................................................. 70,000 11.43
Steven D. Oldenburg (1)..................................................... 7,500 8.00
All current executive officers as a group (7) persons....................... 320,000 13.71
All current non-employee directors as a group (4) persons................... 24,000 13.69
All current employees, including current officers who are not executive
officers, as a group (18) persons......................................... 109,500 12.46
</TABLE>
- ------------------------
(1) Mr. Oldenburg resigned as an officer of the Company on December 31, 1998.
As of April 1, 1999, options covering 520,500 shares of Common Stock were
outstanding under the 1996 Plan, 504,500 shares remained available for future
option grants, and 165,000 shares have been issued under the 1996 Plan in
connection with option exercises.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1996 Plan in any or all respects
whatsoever, subject to any shareholder approval required under applicable law or
regulation. The Board may terminate the 1996 Plan at any time, and the 1996 Plan
will in all events terminate on June 19, 2006.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1996 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two (2)
holding periods is not satisfied, then a disqualifying disposition will result.
11
<PAGE>
Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of those shares on the exercise date over
(ii) the exercise price paid for the shares will be taxable as ordinary income
to the optionee. Any additional gain or loss recognized upon the disposition
will be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the 1996 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation
12
<PAGE>
deemed paid with respect to those options will remain deductible by the Company
without limitation under Internal Revenue Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than the
fair market value of the shares on the grant or issue date will result in a
direct compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances with exercise or issue prices equal to the fair market value of
the shares at the time of issuance or grant will not result in any charge to the
Company's earnings, but the Company must disclose in the notes to the Company's
financial statements the fair value of options granted under the 1996 Plan and
the pro forma impact on the Company's annual net income and earnings per share
as though the computed fair value of such options had been treated as
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which have no
conditions upon exercisability other than a service or employment requirement,
then such rights will result in a compensation expense to the Company's
earnings.
NEW PLAN BENEFITS
As of April 1, 1999, the Salary Investment Option Grant and Director Fee
Option Grant Programs had not been adopted, accordingly, no option grants have
been made under these programs. If the proposal is approved by the stockholders,
the Director Fee Option Grant Program will be implemented for the 1999 year with
respect to retainer fees and attendance not yet earned as of the date of
shareholder approval, and each of the non-employee Board members will receive an
option grant at the 1999 Annual Shareholders meeting under the automatic grant
program for $20,000-value option with an exercise price per share equal to the
closing price per share of common stock on that date.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendments to the 1996 Plan. Should such
shareholder approval not be obtained, the Salary Investment Option Grant and
Director Fee Option Grant Programs will not be incorporated into the 1996 Plan
and the change to the calculation of the number of shares subject to the annual
option grants to be made to non-employee Board members will not be implemented.
The 1996 Plan will, however, continue to remain in effect, and option grants and
direct stock issuances may continue to be made pursuant to the provisions of the
1996 Plan in effect prior to the new amendment, until the available reserve of
Common Stock as last approved by the stockholders has been issued pursuant to
option grants made under the 1996 Plan and each non-employee Board member will
continue to receive annual option grants for 1,000 shares at each Annual
Shareholder's meeting at which they remain on the Board.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSED AMENDMENTS TO THE 1996 PLAN.
13
<PAGE>
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG LLP served as independent public accountants for the
Company for the fiscal year ended December 31, 1998. The Board of Directors
desires the firm to continue in this capacity for the fiscal year ending
December 31, 1999. In the event that stockholders fail to ratify the selection
of KPMG LLP the Board of Directors will reconsider such selection.
A representative of KPMG LLP will be present at the 1999 Annual Meeting of
Stockholders to respond to appropriate questions and make a statement if such
representative desires to do so.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1999 by (i) each person
who is known to the Company to own beneficially more than five percent of the
outstanding shares of the Company's Common Stock; (ii) each Director; (iii) each
officer listed in the Summary Compensation Table, and (iv) all Directors and
Executive Officers as a group. The mailing address for each individual, officer
or director is c/o Willis Lease Finance Corporation, 2230 Marinship Way, Suite
300, Sausalito, CA 94965.
<TABLE>
<CAPTION>
COMMON STOCK(1)
-----------------------
PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
- ----------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Charles F. Willis, IV (2)................................................................ 3,004,422 40.8%
Edwin F. Dibble (3)...................................................................... 26,068 *
Steven D. Oldenburg (4).................................................................. 7,500 *
James D. McBride (5)..................................................................... 7,676 *
Donald A. Nunemaker (6).................................................................. 15,376 *
William M. LeRoy (7)..................................................................... 8,000 *
Donald E. Moffitt........................................................................ 5,000 *
Robert H. Rau............................................................................ 5,000 *
Willard H. Smith, Jr. (7)................................................................ 8,000 *
All Directors and Executive Officers as a group (9 persons).............................. 3,087,042 41.9%
J.P. Morgan & Co. Incorporated (8)....................................................... 896,100 12.2%
Wellington Management Company LLP (9).................................................... 480,100 6.5 %
</TABLE>
- ------------------------
* Less than one percent
(1) Except as indicated in the footnotes to this table, the stockholders named
in the table are known to the Company to have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned
by them, subject to community property laws where applicable. The number of
shares beneficially owned includes Common Stock of which such individual has
the right to acquire beneficial ownership either currently or within 60 days
after April 1, 1999, including, but not limited to, upon the exercise of an
option.
14
<PAGE>
(2) All 3,004,422 shares are held by CFW Partners, L.P, a California Limited
Partnership of which Charles F. Willis, IV holds a one percent (1%) interest
as the sole general partner and of which he holds an eighty percent (80%)
interest as a limited partner. A trust for the benefit of Mr. Willis' son
holds the remaining nineteen percent (19%) interest as a limited partner.
(3) Includes 22,500 options to purchase shares at an exercise price of $8.00.
(4) Mr. Oldenburg resigned as an officer of the Company on December 31, 1998.
(5) Includes 7,500 options to purchase shares at an exercise price of $19.50.
(6) Includes 15,000 options to purchase shares at an exercise price of $14.75.
(7) Includes 7,000 options to purchase shares at a weighted average exercise
price of $10.48.
(8) Based on Schedule 13G/A filed by J.P. Morgan & Co. Incorporated with the SEC
on February 23, 1999. J.P. Morgan & Co. Incorporated's mailing address is
500 Stanton Christiana Road, Newark, DE 19713.
(9) Based on Schedule 13G filed by Wellington Management Company, LLP with the
SEC on February 10, 1999. Wellington Management Company, LLP's mailing
address is 75 State Street, Boston, MA 02109.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and Executive Officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and holders of more than ten percent of the
Company's Common Stock are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations from its officers and Directors, the Company
believes that during the fiscal year ended December 31, 1998, its officers,
directors and holders of more than ten percent of the Company's Common Stock
complied with all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent beneficial owners.
REPORT OF THE COMPENSATION COMMITTEE AND THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
At the end of fiscal year 1998 the Compensation Committee of the Board of
Directors was composed of two non-employee Directors, Willard H. Smith, Jr.,
Chairman, and William M. LeRoy.
The Compensation Committee administers the Company's compensation policies
and programs and has primary responsibility for executive compensation matters,
including the establishment of the base salaries of the Company's executive
officers, the approval of individual bonuses and bonus programs for executive
officers and the administration of certain employee benefit programs. In
addition, the Compensation Committee has exclusive responsibility for
administering the 1996 Plan, under which stock option grants and direct stock
issuances may be made to executive officers and other employees. For the 1998
fiscal year, such compensation levels were determined with the assistance of the
Executive Vice President, Chief Administrative Officer and an independent
consulting firm, Westward Pay Strategies, Inc. of San Francisco, California
("Westward Pay"). In 1998, Westward Pay was commissioned by the Compensation
Committee to undertake a comprehensive review and comparative analysis of the
Company's overall compensation practices, including director compensation.
Westward Pay furnished the Compensation
15
<PAGE>
Committee with executive compensation data drawn from surveys of similarly sized
companies (the "Peer Companies"). During the remainder of the year, the
Compensation Committee also directed Westward Pay to perform additional analyses
relating to stock option practices and CEO compensation, the results of which
were reported to the Compensation Committee.
The Compensation Committee made its decisions primarily on the basis of its
understanding of the compensation practices of Peer Companies and fixed the
compensation package of each executive officer at a level which was competitive
with those practices. The positions of the Company's President and CEO and
executive officers were compared with those of their counterparts at the Peer
Companies, and the market compensation levels for comparable positions were
examined to determine base salary and total cash compensation. In addition, the
practices of the Peer Companies concerning stock option grants were reviewed and
compared. A similar survey was followed in reviewing compensation for the Board
of Directors. The Company's policy is to target total cash compensation levels
between the 60th and 75th percentile at Peer Companies.
The following is a summary of policies which the Compensation Committee
applied in 1998 in setting the compensation levels for the Company's executive
officers.
GENERAL COMPENSATION POLICY. The objectives of the Company's executive
compensation program are to motivate and retain current executives and to
attract future ones. The Company's executive compensation program is designed
to: (1) provide a direct and substantial link between Company performance and
executive pay, (2) consider individual performance and accomplishments and
compensate accordingly, and (3) determine the Company's position in the aviation
services market and be competitive in that labor market. The Company's intent is
to position its executive cash compensation levels around the 60th-75th
percentile of comparable U.S. companies. To this end, the Company tracks
executive pay levels against Peer Companies. The Committee also considers
geographic location and companies that may compete with the Company in
recruiting executive talent.
FACTORS. The principal factors which the Compensation Committee considers
in establishing the components of each executive officer's compensation package
are summarized below. The Compensation Committee may, however, in its discretion
apply entirely different factors in setting executive compensation for future
fiscal years.
BASE SALARY. The base salary for each executive officer is set on the basis
of personal performance, the Compensation Committee's assessment of salary
levels in effect for comparable positions with the Company's principal
competitors and Peer Companies, and internal comparability considerations. The
weight given to each of these factors may vary from individual to individual.
The Compensation Committee will generally rely upon specific compensation
surveys, such as the WESTWARD PAY survey referred to above, for comparative
compensation purposes. Base salaries are reviewed on an annual basis, and
adjustments are made in accordance with the factors indicated above.
INCENTIVE COMPENSATION. The Compensation Committee has established an
incentive compensation program pursuant to which each executive officer is
eligible to earn a bonus on the basis of the achievement of certain Company and
individual goals. The bonuses earned by each of the executive officers is set
forth in the Summary Compensation Table which appears later in this Proxy
Statement.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided through
stock option grants. The grants are designed to align the interests of the
executive officers with those of the stockholders, and to provide executive
officers with a significant incentive to manage the Company from the perspective
of an owner with an equity stake in the business. The stock option plan
encourages long-term retention and provides rewards to executives and other
eligible employees commensurate with growth in shareholder value. It is the
Committee's practice to grant options to purchase shares at the market price on
the date of grant with a term of up to ten years. The options granted to the
Company's executive officers during fiscal 1998 will vest in four equal annual
installments. Accordingly, the options will provide a return to the
16
<PAGE>
executive officer only if he remains in the Company's employ and the market
price of the underlying shares of Common Stock appreciates.
The number of shares subject to each option grant is set at a level intended
to create a meaningful opportunity for stock ownership based on the executive
officer's current position with the Company, the base salary associated with
that position, the size of comparable awards made to individuals in similar
positions within the industry, the individual's potential for increased
responsibility and promotion over the option term, and the individual's personal
performance in recent periods. The Committee also takes into account the number
of unvested options held by the executive officer in order to maintain an
appropriate level of equity incentive for that individual. However, the
Committee does not adhere to any specific guidelines as to the relative option
holdings of the Company's executive officers.
CEO COMPENSATION. The compensation payable to Mr. Willis, the Company's
Chief Executive Officer during fiscal year 1998, was determined by the
Compensation Committee. His base salary was set at a level which the Board felt
would be competitive with the base salary levels in effect for CEO's at
similarly-sized companies within the industry. Based upon the Compensation
Committee's evaluation of the Company's performance and Mr. Willis' individual
performance, the Compensation Committee raised Mr. Willis' bonus to $350,000
annually, assuming satisfaction of certain goals. In the 1998 fiscal year, Mr.
Willis received a bonus of $350,000, representing payment for performance in
1997 payable in 1998 and payment for performance in 1998 payable in 1998.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162. Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly-held companies for compensation paid to certain executive officers, to
the extent that compensation exceeds $1 million per officer in any year. The
compensation paid to the Company's executive officers for the 1998 fiscal year
did not exceed the $1 million limit per officer, and the compensation to be paid
to the Company's executive officers for the 1999 fiscal year is not expected to
exceed that limit. In addition, the 1996 Plan is structured so that any
compensation deemed paid to an executive officer in connection with the exercise
of his or her outstanding options under the 1996 Plan will qualify as
performance-based compensation which will not be subject to the $1 million
limitation.
Submitted by both the Board of Directors and the Compensation Committee of
the Company's Board of Directors:
Charles F. Willis, IV
William M. LeRoy
Donald E. Moffitt
Robert H. Rau
Willard H. Smith, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1998, two non-employee Directors served on the
Compensation Committee. As of March 30, 1999, the Board of Directors authorized
a change in the Compensation Committee and the Compensation Committee currently
consists of the following three non-employee directors: Robert H. Rau, Chairman,
Donald E. Moffitt and Willard H. Smith. None of the executive officers of the
Company currently serves on the compensation committee of the Company or any
other entity or any other committee of the board of directors of another entity
performing similar functions.
17
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by (i) the Company's Chief Executive Officer and (ii) each
of the four other most highly compensated executive officers of the Company
serving as such as of the end of the 1998 fiscal year and whose total annual
salary and bonus exceeds $100,000. Such individuals will be referred to herein
as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMPENSATION OPTIONS
- --------------------------------------------------- ----------- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Charles F. Willis, IV.............................. 1998 $ 400,000 $ 350,000 -- 40,000
Chief Executive Officer 1997 250,000 350,000 -- --
1996 448,488 175,000 -- --
Edwin F. Dibble.................................... 1998 249,144 56,250 -- 40,000
Executive Vice President/ 1997 100,000 353,656(1) -- --
Willis Aeronautical Services, Inc. 1996 100,000 264,615(1) -- 30,000
James D. McBride................................... 1998 170,000 158,950 -- 30,000
Executive Vice President, CFO (2) 1997 47,282 44,842 30,000(3) 30,000
Donald A. Nunemaker................................ 1998 170,000 144,500 -- 30,000
Executive Vice President(4) 1997 63,654 60,505 85,022(5) 30,000
Steven D. Oldenburg................................ 1998 152,884 127,500 -- --
Senior Vice President (6) 1997 135,417 136,983 95,125(7) --
1996 125,000 43,000 23,387(8) 30,000
</TABLE>
- --------------------------
(1) In the 1996 and 1997 fiscal years, Mr. Dibble's bonus was determined as a
percentage of pre-tax profits of Willis Aeronautical Services, Inc.
("WASI").
(2) Mr. McBride was hired by the Company in September 1997.
(3) This consists of a signing bonus of $30,000.
(4) Mr. Nunemaker was hired by the Company in July of 1997.
(5) This consists of a signing bonus of $50,000 and a moving expense
reimbursement of $35,022.
(6) Mr. Oldenburg resigned from the Company on December 31, 1998.
(7) This consists of an additional bonus of $15,125 relating to the 1996 fiscal
year, a $62,000 bonus related to a specific transaction and an $18,000
reimbursement for relocation expenses paid by the Company.
(8) Represents relocation expenses paid by the Company.
STOCK OPTIONS
The following table sets forth information concerning the stock options
granted by the Company during the 1998 fiscal year to the Named Executive
Officers. No stock appreciation rights were granted during the 1998 fiscal year
to the Named Executive Officers.
18
<PAGE>
OPTION GRANTS IN 1998 FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE OR PRICE APPRECIATION
UNDERLYING EMPLOYEES IN BASE PRICE FOR OPTION TERM(1)
OPTIONS FISCAL YEAR PER EXPIRATION ----------------------
NAME GRANTED(2) 1998 SHARE(3) DATE 5% 10%
- --------------------------------------- ----------- ------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Willis, IV.................. 40,000 13% $ 14.00 9/03/08 $ 466,270 $ 1,074,220
Edwin F. Dibble........................ 40,000 13% $ 14.00 9/18/08 $ 466,270 $ 1,074,220
James D. McBride....................... 30,000 10% $ 14.00 9/18/08 $ 349,703 $ 805,665
Donald A. Nunemaker.................... 30,000 10% $ 14.00 9/18/08 $ 349,703 $ 805,665
Steven D. Oldenburg (4)................ 25,000 8% $ 14.00 12/31/98(4) N/A N/A
</TABLE>
- --------------------------
(1) There is no assurance provided to the option holder or any other holder of
the Company's securities that the actual stock price appreciation over the
10-year option term will be at the 5% and 10% assumed annual rates of
compounded stock price appreciation.
(2) Each of the option grants vests in a series of four successive equal annual
installments over the optionee's period of continued employment, measured
from the option grant date.
(3) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income and employment tax liability incurred by the optionee in connection
with such exercise.
(4) Mr. Oldenburg resigned from the Company on December 31, 1998. At that time
Mr. Oldenburg forfeited all of his 1998 option grants.
STOCK OPTION EXERCISE AND HOLDINGS
The following table sets forth certain information concerning the exercise
of the stock options during the 1998 fiscal year and the value of unexercised
stock options at the end of the 1998 fiscal year for the Named Executive
Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Willis, IV........... -- -- -- 40,000 -- $ 70,000
Edwin F. Dibble................. -- -- 22,500 47,500 $ 174,375 $ 128,125
Steven D. Oldenburg (2)......... 15,000 194,900 7,500 -- $ 58,125 --
James D. McBride................ -- -- 7,500 52,500 $ (28,125) $ (31,875)
Donald A. Nunemaker............. -- -- 15,000 45,000 $ 15,000 $ 67,500
</TABLE>
- --------------------------
(1) Computed based upon the difference between the closing price of the shares
on December 31, 1998 ($15.75 per share) and the exercise price.
(2) Mr. Oldenburg resigned from the Company on December 31, 1998.
19
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL AGREEMENTS
The Company presently has the following employment contracts in effect with
the Named Executive Officers:
EDWARD F. DIBBLE. Effective January 1, 1997, Mr. Dibble signed a five-year
employment agreement with WASI. The agreement automatically renews for an
additional year unless WASI gives notice of termination sixty days prior to the
expiration of the employment period. Upon execution, Mr. Dibble's base salary
was $100,000 per year. Effective January 1, 1998, Mr. Dibble's base salary was
raised to $225,000 per year, subject to adjustment by the Board of Directors.
JAMES D. MCBRIDE. Effective September 9, 1997, Mr. McBride signed a
two-year employment agreement with the Company. The agreement automatically
renews for additional one-year terms unless either party gives notice of
non-renewal six months prior to expiration of the current term. Upon execution
of the agreement, Mr. McBride's base salary was $150,000 per year, subject to
adjustment by the Company's Board of Directors. Effective January 1, 1998, Mr.
McBride's base salary was raised to $170,000 per year. Mr. McBride is entitled
to receive bonuses under the Company's Incentive Compensation Plan.
DONALD A. NUNEMAKER. Effective July 16, 1997, Mr. Nunemaker signed a
two-year employment agreement with the Company. The agreement automatically
renews for additional one-year terms unless either party gives notice of
non-renewal six months prior to expiration of the current term. Upon execution
of the agreement, Mr. Nunemaker's base salary was $150,000 per year, subject to
adjustment by the Company's Board of Directors. Effective January 1, 1998 Mr.
Nunemaker's base salary was raised to $170,000 per year. Mr. Nunemaker is
entitled to receive bonuses under the Company's Incentive Compensation Plan.
In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by the Chief Executive Officer and the other
executive officers under the 1996 Plan will automatically accelerate in full and
all unvested shares of Common Stock held by such individuals subject to direct
issuances made under such plans will immediately vest in full, except to the
extent such options are to be assumed by, and the Company's repurchase rights
with respect to these shares are to be assigned to, the successor corporation.
In addition, upon an involuntary termination of the Chief Executive Officer or
any of the other executive officers under the 1996 Plan within twelve months
following a merger or asset sale or other change in control of the Company, each
outstanding option and all unvested shares of Common Stock held by such
individual will automatically vest in full. Furthermore, with regard to future
option grants and direct stock issuances, the Plan Administrator of the 1996
Plan has the authority to provide for accelerated vesting of the shares of
Common Stock subject to any outstanding options held by the Chief Executive
Officer or any other executive officer or any unvested share issuances actually
held by such individual, in connection with certain changes in control of the
Company or the subsequent termination of the officer's employment following the
change in control event.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the 1998 fiscal year, there were no transactions between the Company
and its Directors, Executive Officers or known holders of greater than five
percent of the Company's Common Stock in which the amount involved exceeded
$60,000 and in which any of the foregoing persons had or will have a direct or
indirect material interest.
20
<PAGE>
STOCK PERFORMANCE GRAPH
The following performance graph shows the percentage change in cumulative
total return to a holder of the Company's Common Stock, assuming dividend
reinvestment, compared with the cumulative total return, assuming dividend
reinvestment, of the NASDAQ Stock Market-US Index and the NASDAQ Financial
Index, during the period from September 18, 1996 through December 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG WILLIS LEASE FINANCE CORPORATION, THE NASDAQ STOCK MARKET-US
INDEX AND THE NASDAQ FINANCIAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WILLIS LEASE FINANCE
CORPORATION NASDAQ-TOTAL US NASDAQ FINANCIAL INDEX
<S> <C> <C> <C>
9/18/96 100.00 100.00 100.00
12/31/96 160.94 107.06 113.08
6/30/97 157.81 119.81 137.37
12/31/97 218.75 131.34 172.75
6/30/98 285.94 158.13 178.38
12/31/98 196.88 184.63 167.14
</TABLE>
* $100 invested on 9/18/96 in stock or in index including reinvestment of
dividends. Fiscal year ending December 31.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2000 Annual Meeting
of Stockholders must be received by the Company no later than January 4, 2000.
The proposal must be mailed to the Company's principal executive offices, 2320
Marinship Way, Suite 300, Sausalito, California 94965. Such proposals may be
included in next year's proxy statement if they comply with certain rules and
regulations promulgated by the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matters to be presented at the 1999 Annual
Meeting of Stockholders other than those set forth herein and in the Notice
accompanying this Proxy Statement.
21
<PAGE>
INCORPORATION BY REFERENCE
The consolidated financial statements of the Company, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
the Report of Independent Accountants included in the Company's 1998 Annual
Report on Form 10-K are incorporated herein by this reference. Copies of the
Company's Annual Report on Form 10-K will be provided to stockholders without
charge, upon written request to James D. McBride, Chief Financial Officer,
Willis Lease Finance Corporation, 2230 Marinship Way, Suite 300, Sausalito,
California 94965.
By Order of the Board of Directors,
[SIGNATURE]
Charles F. Willis, IV
CHAIRMAN OF THE BOARD
April 23, 1999
Sausalito, California
22
<PAGE>
-arrow- Please Detach and Mail in the Envelope Provided -arrow-
- -------------------------------------------------------------------------------
WILLIS LEASE FINANCE CORPORATION
PROXY
1999 ANNUAL MEETING OF STOCKHOLDERS
MAY-25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles F. Willis, IV, Donald A. Nunemaker and
Rae A. Capps, and each of them, as Proxies of the undersigned with full power
of substitution to act and to vote all of the shares of Common Stock of WILLIS
LEASE FINANCE CORPORATION held of record by the undersigned on April 6, 1999 at
the Annual Meeting of Stockholders of the Company to be held on May 25, 1999,
or at any adjournment thereof.
The Board of Directors recommends a vote for Proposals 1, 2 and 3 on the other
side. This proxy will be voted in accordance with the choices specified by the
undersigned on the other side of this proxy. IF NO INSTRUCTIONS TO THE
CONTRARY ARE INDICATED HEREON, THIS PROXY WILL BE TREATED AS A GRANT OF
AUTHORITY TO VOTE FOR THE ELECTION OF THE NOMINEES FOR CLASS I OF THE BOARD OF
DIRECTORS NAMED ON THE OTHER SIDE HEREOF AND AS A GRANT OF AUTHORITY TO VOTE
FOR PROPOSALS 2 AND 3 STATED ON THE OTHER SIDE HEREOF AND ON ANY OTHER MATTERS
TO BE VOTED ON. PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
IMPORTANT: THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
<PAGE>
-arrow- FOLD AND DETACH HERE -arrow-
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR ALL NOMINEES WITHHOLD
LISTED BELOW (EXCEPT AUTHORITY TO VOTE
AS MARKED TO THE FOR ALL NOMINEES
CONTRARY BELOW) LISTED BELOW
1. ELECTION OF TWO / / / /
CLASS I DIRECTORS
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
NOMINEES:
William M. LeRoy, Robert H. Rau
FOR ABSTAIN AGAINST
2. Proposal to amend the 1996 Stock Option/Stock
Issuance Plan to incorporate into the Plan the
Salary Investment Option Grant and Director / / / / / /
Fee Option Grant Programs and to change the
annual option grant to non-employee Board
members from an option to purchase a fixed
number of shares to an option for a fixed
value based upon a Black-Scholes option
valuation.
3. Proposal to ratify the selection of
KPMG LLP as independent auditors of the Company / / / / / /
4. In their discretion, the Proxies are authorized
to vote upon such other matters as may properly / / / / / /
come before the meeting.
Signature(s)____________________________________Date:__________________________
Please sign exactly as your name(s) is (are) shown on the stock certificate to
which the Proxy applies. When stock is held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
