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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
WILLIS LEASE FINANCE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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/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:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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/ / 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
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(1) Amount Previously Paid:
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WILLIS LEASE FINANCE CORPORATION
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NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2000
---------------------
To our Stockholders:
You are cordially invited to attend the 2000 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 23, 2000, for the following purposes:
1. To elect two Class II Directors to serve until the 2003 Annual Meeting
of Stockholders;
2. To consider a proposal to amend the Company's 1996 Stock Option/Stock
Issuance Plan (the "1996 Plan") to (i) increase the maximum number of
shares of Common Stock authorized for issuance over the term of the 1996
Plan from 1,025,000 to 1,525,000 shares, and (ii) increase the maximum
number of option shares that may be granted annually to each non-employee
director under the Automatic Grant Program from 5,000 to 10,000 shares;
3. To ratify the selection of KPMG LLP as independent public accountants
for the Company for the fiscal year ending December 31, 2000; 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 14, 2000 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 2000 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 2000 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 27, 2000
Sausalito, California
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WILLIS LEASE FINANCE CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
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PAGE
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SOLICITATION AND VOTING OF PROXIES.......................... 1
INFORMATION ABOUT THE BOARD OF DIRECTORS AND THE COMMITTEES
OF THE BOARD.............................................. 2
PROPOSAL 1 ELECTION OF CLASS II 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................................................ 15
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
OF 1934................................................... 16
REPORT OF THE COMPENSATION COMMITTEE AND THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION....................... 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 18
EXECUTIVE COMPENSATION AND RELATED INFORMATION.............. 19
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL AGREEMENTS.............................. 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 22
STOCK PERFORMANCE GRAPH..................................... 23
STOCKHOLDER PROPOSALS....................................... 23
OTHER MATTERS............................................... 24
INCORPORATION BY REFERENCE.................................. 24
</TABLE>
Exhibit A Willis Lease Finance Corporation 1996 Stock Option/Stock Issuance
Plan
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STOCKHOLDERS SHOULD READ THE ENTIRE PROXY
STATEMENT CAREFULLY PRIOR TO RETURNING THEIR PROXIES
------------------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
OF
WILLIS LEASE FINANCE CORPORATION
TO BE HELD ON MAY 23, 2000
---------------------
SOLICITATION AND VOTING OF PROXIES
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of WILLIS LEASE FINANCE CORPORATION (the
"Company") of proxies to be voted at the 2000 Annual Meeting of Stockholders,
which will be held at 2:00 p.m. on May 23, 2000 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 2000 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 27, 2000. The Company's 2000 Annual
Report is being mailed to stockholders concurrently with this Proxy Statement.
The 2000 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 14, 2000 is the record date for stockholders
entitled to notice of and to vote at the 2000 Annual Meeting of Stockholders. As
of that date, the Company had 7,401,866 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 2000
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 II
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 2000 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 2000 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 II 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, 2000 (Proposal 3). If a properly signed proxy or
ballot indicates that a stockholder, 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
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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 2000 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 stockholder 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 Corporate 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 2000
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, electronic mail 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 President and the Chief Executive Officer 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 held a
total of eleven (11) meetings during the fiscal year ended December 31, 1999
(the "1999 fiscal year"). Each incumbent director whose term of office will
continue after the 2000 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 first three
months of the 1999 fiscal year, this Committee consisted of Directors
William M. LeRoy (Chairman) and Willard H. Smith, Jr. As of March 30, 1999, the
Board authorized a
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change in the Audit Committee and the Audit Committee currently consists of the
following Directors: William M. LeRoy, Chairman, Donald E. Moffitt and
Robert H. Rau. This Committee held four (4) meetings during the 1999 fiscal
year.
The Compensation Committee reviews and approves the Company's compensation
arrangements for senior management and administers the 1996 Plan. During the
first three months of the 1999 fiscal year, this Committee consisted of
Directors Willard H. Smith, Jr. (Chairman) and William M. LeRoy. As of
March 30, 1999, the Board authorized a change in the Compensation Committee and
the Compensation Committee currently consists of the following directors:
Robert H. Rau (Chairman), Donald E. Moffitt and Willard H. Smith, Jr. This
Committee held seven (7) meetings during the 1999 fiscal year.
DIRECTOR COMPENSATION
In the 1999 fiscal year, non-employee members of the Board were each paid an
annual fee of $12,500. Each non-employee member of the Board was also reimbursed
for all reasonable out-of-pocket costs incurred to attend Board 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
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, on the
date of each annual stockholders meeting, 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 a specified number of shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six months. The number of
shares of Common Stock subject to each annual automatic option grant will be
determined by dividing $20,000 by the Black-Scholes formula value of the option.
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 Board.
Each 5,000-share initial 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 $20,000 value annual
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.
Non-employee Directors are also eligible to participate in the Director Fee
Option Grant Program in effect under the 1996 Plan, pursuant to which they may
elect to apply a portion or all of their annual compensation towards the
acquisition of special below-market option grants. On December 31, 1999,
Directors LeRoy and Moffitt, in connection with their elections to apply $12,250
of their compensation for the second half of the 1999 fiscal year to the
acquisition of a special grant under the Director Fee Option Grant Program, were
granted options for 1,427 shares of Common Stock under that program, while
Director Rau, in connection with his election to apply $13,250 of his
compensation for the second half of the 1999 fiscal year to the acquisition of a
special grant under the Director Fee Option Grant Program, was granted options
for 1,544 shares of Common Stock under that program. The options have an
exercise price of $2.146 per share, one-third of the fair market value per share
of the Common Stock on the grant date. Accordingly, the spread on the option
shares at the time of grant (the fair market value of the option shares less the
aggregate exercise price) was equal to $12,250 and $13,250 of the cash retainer
fees which Directors LeRoy and Moffitt and Director Rau, respectively, elected
to apply to their grants. The options became fully exercisable on December 31,
1999. The options have a maximum term of 10 years measured from the grant date,
subject to earlier termination following cessation of Board service. Please see
the
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description of the Director Fee Option Grant Program under Proposal 2 for
further information concerning the remaining terms and conditions of these
director fee option grants.
BIOGRAPHICAL INFORMATION
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CLASS II DIRECTORS WHOSE TERMS EXPIRE DIRECTOR AGE
AT THE 2000 ANNUAL MEETING: SINCE *
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Donald E. Moffitt........................................... 1998 67
Willard H. Smith, Jr........................................ 1996 63
CLASS III DIRECTORS WHOSE TERMS EXPIRE
AT THE 2001 ANNUAL MEETING:
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Charles F. Willis, IV....................................... 1985 51
CLASS I DIRECTORS WHOSE TERMS EXPIRE
AT THE 2002 ANNUAL MEETING:
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William M. LeRoy............................................ 1996 57
Robert H. Rau............................................... 1998 63
</TABLE>
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* Age listed as of April 14, 2000
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. 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 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
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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 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 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, Cohen & Steers
Institutional Realty Shares, Inc. New York, Essex Property Trust, Inc.,
Highwoods Properties, Inc., Realty Income Corporation and Crest Net Lease, Inc.
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 II DIRECTORS
The Board 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 II, each to serve a three-year term expiring at the
Annual Meeting in the year 2003 or until the individual is succeeded by another
qualified director who has been duly elected.
The nominees for Director in Class II are DONALD E. MOFFITT and WILLARD H.
SMITH, JR.
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 2000 Annual Meeting of Stockholders, the proxies will be voted for
any nominee who shall be designated by the present Board to fill the vacancy. As
of the date of this Proxy Statement, the Board 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 II DIRECTORS.
PROPOSAL 2
AMENDMENTS TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve two amendments to the
Company's 1996 Stock Option/Stock Issuance Plan (the "1996 Plan") that will
(i) increase the maximum number of shares of Common Stock authorized for
issuance over the term of the 1996 Plan from 1,025,000 to 1,525,000 and
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(ii) increase the maximum number of option shares that may be granted to
non-employee board members under the Automatic Grant Program from 5,000 shares
to 10,000 shares.
The proposed share increase will assure that a sufficient reserve of Common
Stock is available under the 1996 Plan to attract and retain the services of key
individuals essential to the Company's long-term growth and success.
The amendments to the 1996 Plan were adopted by the Board as of April 4,
2000 and April 24, 2000. 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. A copy of
the actual plan document is attached as Exhibit A.
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. Stockholder
approval of this Proposal 2 will also constitute reapproval of such limitation
and the Board shall reserve 500,000 additional shares of Common Stock for
issuance over the term of 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
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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 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 3, 2000, four (4) executive officers, four (4) non-employee Board
members and fifty (50) 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 and the Director Fee 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 3, 2000, the closing selling price per share was
$7.00.
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
7
<PAGE>
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.
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 2000), 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
8
<PAGE>
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 10,000 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.
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. Stockholder 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.
9
<PAGE>
DIRECTOR FEE OPTION GRANT PROGRAM
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. 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 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.
10
<PAGE>
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.
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 January 1, 1999 and April 3, 2000, 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........................................ -- --
James D. McBride............................................ 80,000 $8.45
Donald A. Nunemaker......................................... 80,000 8.45
Edwin F. Dibble (1)......................................... -- --
David J. Hopkins............................................ 55,000 9.95
All current executive officers as a group (4) persons....... 215,000 8.84
All current non-employee directors as a group (4) persons... 12,885 7.68
All current employees, including current officers who are
not executive officers, as a group (50) persons........... 252,300 8.81
</TABLE>
- ------------------------
(1) Mr. Dibble resigned as an officer of the Company effective September 30,
1999 and forfeited all 1999 option grants.
As of April 3, 2000, options covering 711,685 shares of Common Stock were
outstanding under the 1996 Plan, 116,065 shares remained available for future
option grants, and 197,250 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 stockholder 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.
11
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
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.
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.
12
<PAGE>
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 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.
In September 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of the current account principles
applicable to equity incentive plans. Under the proposed interpretation, option
grants made to independent consultants (but not non-employee Board members)
after December 15, 1998 will result in a direct charge to the Company's reported
earnings based upon the fair value of the option measured initially as of the
grant date of that option and then subsequently on the vesting date of each
installment of the underlying option shares. If the proposed interpretation is
adopted, then such charge will accordingly include the appreciation in the value
of the option shares over the period between the grant date of the option (or,
if later, the effective date of the final interpretation) and the vesting date
of each installment of the option shares. In addition, if the proposed
interpretation is adopted, any options which are repriced after December 15,
1998 will also trigger a direct charge to the Company's reported earnings
measured by the appreciation in value of the underlying shares between the grant
date of the option (or, if later, the effective date of the final
interpretation) and the date the option is exercised for those shares.
13
<PAGE>
NEW PLAN BENEFITS
As of April 3, 2000, no options have been granted, and no direct stock
issuances have been made on the basis of the 500,000 share increase which forms
part of this Proposal.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the 2000 Annual Meeting
of Stockholders is required for approval of the amendments to the 1996 Plan.
Should such stockholder approval not be obtained, then any options granted on
the basis of the 500,000 share increase which forms part of this Proposal will
terminate without becoming exercisable for any of the shares of Common Stock
subject to those options, and no further options will be granted on the basis of
such share increase. In addition, the maximum number of shares for annual option
grants under the Automatic Grant Program will remain at 5,000 shares per
non-employee director. The 1996 Plan will 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.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSED AMENDMENTS TO THE 1996 PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG LLP served as independent public accountants for the
Company for the 1999 fiscal year. The Board desires the firm to continue in this
capacity for the fiscal year ending December 31, 2000. In the event that
stockholders fail to ratify the selection of KPMG LLP the Board will reconsider
such selection.
A representative of KPMG LLP will be present at the 2000 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.
14
<PAGE>
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 3, 2000 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. Unless specified below, the mailing
address for each individual, officer or director is c/o Willis Lease Finance
Corporation, 2320 Marinship Way, Suite 300, Sausalito, CA 94965.
<TABLE>
<CAPTION>
COMMON STOCK(1)
-------------------------
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
- ------------------------------------ --------- -------------
<S> <C> <C>
Charles F. Willis, IV (2)................................... 3,057,922 41.3%
James D. McBride (3)........................................ 32,404 *
Donald A. Nunemaker (4)..................................... 38,071 *
David J. Hopkins............................................ -- *
Edwin F. Dibble (5)......................................... 12,392 *
William M. LeRoy (6)........................................ 17,709 *
Donald E. Moffitt (7)....................................... 8,709 *
Robert H. Rau (8)........................................... 28,882 *
Willard H. Smith, Jr. (9)................................... 9,585 *
All Directors and Executive Officers as a group (9
persons).................................................. 3,205,674 42.7%
J.P. Morgan & Co. Incorporated (10)......................... 856,600 11.6%
Benson Associates, LLC (11)................................. 694,759 9.4%
Dimensional Fund Advisors (12).............................. 376,500 5.0%
</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 3, 2000, including, but not limited to, upon
the exercise of an option.
(2) 2,984,422 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. 73,500 shares are held by Mr. Willis in his individual
capacity, which includes 10,000 options to purchase shares at an exercise
price of $14.00.
(3) Includes 30,000 options to purchase shares at a weighted average exercise
price of $17.14.
(4) Includes 37,500 options to purchase shares at a weighted average exercise
price of $14.61.
(5) Mr. Dibble resigned as an officer of the Company effective September 30,
1999. Mr. Dibble's mailing address is 12118 Mountain Pass Road, San Diego,
CA 92128.
(6) Includes 10,709 options to purchase shares at a weighted average exercise
price of $9.28.
15
<PAGE>
(7) Includes 8,709 options to purchase shares at a weighted average exercise
price of $13.34.
(8) Includes 8,882 options to purchase shares at a weighted average exercise
price of $13.35.
(9) Includes 8,585 options to purchase shares at a weighted average exercise
price of $10.88.
(10) Based on Schedule 13G/A filed by J.P. Morgan & Co. Incorporated with the
SEC on February 15, 2000. J.P. Morgan & Co. Incorporated's mailing address
is 500 Stanton Christiana Road, Newark, DE 19713. The Schedule 13G/A notes
J.P. Morgan & Co. Incorporated has sole power to vote 713,800 shares.
(11) Based on Schedule 13G filed by Benson Associates, LLC with the SEC on
February 16, 2000. Benson Associates, LLC's mailing address is 111 S.W.
Fifth Avenue, Suite 2130, Portland, OR 97204.
(12) Based on Schedule 13G filed by Dimensional Fund Advisors with the SEC on
February 3, 2000. Dimensional Fund Advisors' mailing address is 1299 Ocean
Avenue, Santa Monica, CA 90401.
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, 1999, 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, except that
Mr. David Hopkins inadvertently filed his Form 5 with respect to the 1999 fiscal
year two days after its due date and Directors Moffitt, LeRoy and Rau each
inadvertently omitted option grants which were granted on December 31, 1999 with
respect to 1,427, 1,427, and 1,544 shares respectively from their Form 5's filed
with respect to the 1999 fiscal year. Each such Director filed a Form 4 on
March 14, 1999 to correct their omissions, promptly after the failure to file
was discovered.
REPORT OF THE COMPENSATION COMMITTEE AND THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
At the end of the 1999 fiscal year the Compensation Committee of the Board
was composed of three non-employee Directors: Robert H. Rau (Chairman), Donald
E. Moffitt and Willard H. Smith.
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 1999
fiscal year, such compensation matters 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"), who furnished the Compensation Committee with executive
compensation data drawn from surveys of similarly sized companies (the "Peer
Companies"). The Compensation Committee also directed Westward Pay to perform
additional analyses relating to stock
16
<PAGE>
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
around the 75th percentile at Peer Companies.
The following is a summary of policies which the Compensation Committee
applied in 1999 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 75th percentile of
comparable U.S. companies. To this end, the Company tracks executive pay levels
against Peer Companies. The Compensation 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 surveys 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 are 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 stockholder 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 year 1999 will vest in four equal
annual installments. Accordingly, the options will provide a return to the
executive officer only if he remains in the Company's employ and the market
price of the underlying shares of Common Stock appreciates.
17
<PAGE>
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 1999, was determined by the
Compensation Committee. His base salary was set at a level which the
Compensation Committee felt would be competitive with the base salary levels in
effect for CEO's at similarly-sized companies within the industry. In the 1999
fiscal year, Mr. Willis received a bonus of $312,463, representing payment for
performance in 1998 payable in 1999 and payment for performance in 1999 payable
in 1999.
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 1999 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 2000 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 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 January 1, 1999, 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.
18
<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, (ii) each of
the three other most highly compensated executive officers of the Company
serving as such as of the end of the 1999 fiscal year and whose total annual
salary and bonus exceeds $100,000 and (iii) one executive officer of the Company
whose total annual salary and bonus would have placed such officer within the
four most highly compensated officers of the Company, but for the fact that such
officer resigned effective September 30, 1999. Such individuals will be referred
to herein as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- --------------------------- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Charles F. Willis, IV................... 1999 $400,000 $ 137,463 -- --
Chief Executive Officer 1998 400,000 350,000 -- 40,000
1997 250,000 350,000 -- --
James D. McBride........................ 1999 200,000 97,737 -- 80,000
Executive Vice President, CFO (1) 1998 170,000 158,950 -- 30,000
1997 47,282 44,842 $ 30,000(2) 30,000
Donald A. Nunemaker..................... 1999 200,000 97,737 -- 80,000
Executive Vice President, CAO (3) 1998 170,000 144,500 -- 30,000
1997 63,654 60,505 85,022(4) 30,000
Edwin F. Dibble......................... 1999 206,250 -- 200,000(6) --
Executive Vice President 1998 249,144 56,250 -- 40,000
Willis Aeronautical Services, Inc. (5) 1997 100,000 353,656(7) -- --
David J. Hopkins (8).................... 1999 60,000 25,500 51,103(9) 55,000
Senior Vice President/Sales and
Marketing
</TABLE>
- ------------------------
(1) Mr. McBride was hired by the Company in September 1997.
(2) This consists of a signing bonus of $30,000.
(3) Mr. Nunemaker was hired by the Company in July 1997.
(4) This consists of a signing bonus of $50,000 and a moving expense
reimbursement of $35,022.
(5) Mr. Dibble resigned from the Company effective September 30, 1999.
(6) This consists of certain termination payments and relocation expenses.
(7) In the 1997 fiscal year, Mr. Dibble's bonus was determined as a percentage
of pre-tax profits of Willis Aeronautical Services, Inc.
(8) Mr. Hopkins was hired by the Company in August 1999. On April 20, 2000, Mr.
Hopkins was appointed to the position of Senior Vice President, OEM Services
and he no longer holds the position of Senior Vice President/Sales and
Marketing.
(9) This consists of a signing bonus of $22,279 and relocation pay of $28,824.
19
<PAGE>
STOCK OPTIONS
The following table sets forth information concerning the stock options
granted by the Company during the 1999 fiscal year to the Named Executive
Officers. No stock appreciation rights were granted during the 1999 fiscal year
to the Named Executive Officers.
OPTION GRANTS IN 1999 FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
NUMBER OF GRANTED TO PRICE APPRECIATION
SECURITIES EMPLOYEES IN EXERCISE OR FOR OPTION TERM(1)
UNDERLYING OPTIONS FISCAL YEAR BASE PRICE ----------------------
NAME GRANTED(2) 1999 PER SHARE(3) EXPIRATION DATE 5% 10%
- ---- ------------------ ------------ ------------ --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Willis, IV.... -- -- -- -- -- --
James D. McBride......... 30,000 6.4% $15.56 4/22/09 $(152,199) $ 34,166
50,000 10.7% $ 4.19 10/25/09 $ 314,834 $625,444
Donald A. Nunemaker...... 30,000 6.4% $15.56 4/22/09 $(152,199) $ 34,166
50,000 10.7% $ 4.19 10/25/09 $ 314,834 $625,444
Edwin F. Dibble (4)...... -- -- -- -- -- --
David J. Hopkins......... 30,000 6.4% $14.75 8/16/09 $(127,899) $ 58,466
25,000 5.4% $ 4.19 10/25/09 $ 157,417 $312,722
</TABLE>
- ------------------------
(1) There is no assurance provided to the option holder or any other holder of
the Company's securities that the actual stock price appreciation over the
10-year option term will be at the 5% and 10% assumed annual rates of
compounded stock price appreciation.
(2) Each of the option grants vests in a series of four successive equal annual
installments over the optionee's period of continued employment, measured
from the option grant date.
(3) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income and employment tax liability incurred by the optionee in connection
with such exercise.
(4) Mr. Dibble resigned from the Company effective September 30, 1999. At that
time Mr. Dibble forfeited all of his 1999 option grants.
20
<PAGE>
STOCK OPTION EXERCISE AND HOLDINGS
The following table sets forth certain information concerning the exercise
of the stock options during the 1999 fiscal year and the value of unexercised
stock options at the end of the 1999 fiscal year for the Named Executive
Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL
SHARES OPTIONS AT FISCAL YEAR-END YEAR-ENDED(1)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Willis, IV........ -- -- 10,000 30,000 $ 0 $ 0
James D. McBride............. -- -- 22,500 117,500 $ 0 $112,375
Donald A. Nunemaker.......... -- -- 30,000 110,000 $ 0 $112,375
Edwin F. Dibble (2).......... -- -- 30,000 -- $ 0 --
David J. Hopkins............. -- -- -- 55,000 -- $ 56,188
</TABLE>
- ------------------------
(1) Computed based upon the difference between the closing price of the shares
on December 31, 1999 ($6.4375 per share) and the exercise price.
(2) Mr. Dibble resigned from the Company effective September 30, 1999.
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:
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, 1999,
Mr. McBride's base salary was raised to $200,000 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, 1999
Mr. Nunemaker's base salary was raised to $200,000 per year. Mr. Nunemaker is
entitled to receive bonuses under the Company's Incentive Compensation Plan.
DAVID J. HOPKINS. Effective August 16, 1999, Mr. Hopkins 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. Hopkin's base salary was $160,000 per year, subject to adjustment by the
Company's Board of Directors. Mr. Hopkins is entitled to receive bonuses under
the Company's Incentive Compensation Plan.
EDWIN DIBBLE. On October 29, 1999, the Company entered into a Settlement
and General Release of Claims with Edwin Dibble. Under this agreement, the
Company paid Mr. Dibble a total amount of $200,000 in satisfaction of all
amounts owing to Mr. Dibble in connection with the termination of his
employment, including certain relocation expenses. Mr. Dibble agreed to the
termination of additional
21
<PAGE>
vesting of his stock options and executed a general release of all claims
arising out of his employment, existing or potential, against the Company.
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 1999 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 nor was any Director, Executive Officer, any members
of any Director's or Executive Officer's immediate families, or any entity or
trust controlled by any such Director or Executive Officer indebted to the
Company in an amount in excess of $60,000 at any time during the 1999 fiscal
year.
22
<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, 1999.
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
Total Return Performance
<TABLE>
<CAPTION>
NASDAQ US NASDAQ FINANCIAL WLFC STOCK
<S> <C> <C> <C>
Index Value Stocks Index Value Index Value
9/18/96 100.000 100.000 100.000
12/31/96 106.772 113.079 160.938
6/30/97 119.481 137.353 157.813
12/31/97 130.830 172.985 218.750
6/30/98 157.319 178.607 285.938
12/31/98 184.356 167.919 196.875
6/30/99 225.63 185.102 203.913
12/31/99 333.059 166.048 80.475
</TABLE>
* $100 invested on 9/18/96 in stock or in index including reinvestment of
dividends. Fiscal year ending December 31, 1999.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2001 Annual Meeting
of Stockholders must, under Rule 14a-8 of the Securities and Exchange Act of
1934, be received by the Company no later than January 4, 2001. The proposal
must be mailed to the Company's principal executive offices, 2320 Marinship Way,
Suite 300, Sausalito, California 94965, Attention: Corporate Secretary. 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.
Alternatively, under the Company's Bylaws, a proposal or nomination that the
stockholder does not seek to include in the Company's Proxy Statement pursuant
to Rule 14a-8 may be submitted in writing to the Secretary of the Company for
the 2001 Annual Meeting of Stockholders not less than 90 days prior to the date
on which the Company first mailed its proxy materials for the 2000 Annual
Meeting, unless the date of the 2001 Annual Meeting of Stockholders is advanced
by more than 30 days or delayed (other than
23
<PAGE>
as a result of adjournment) by more than 60 days from the anniversary of the
2000 Annual Meeting. For the Company's 2001 Annual Meeting of Stockholders, this
means that any such proposal or nomination must be submitted no later than
February 23, 2000. If the date of the 2001 Annual Meeting of Stockholders is
advanced by more than 30 days or delayed (other than as a result of adjournment)
by more than 60 days from the anniversary of the 2000 Annual Meeting, the
stockholder must submit any such proposal or nomination no later than the close
of business on the later of the 90th day prior to the 2001 Annual Meeting of
Stockholders or the 10th day following the day on which public announcement of
the date of such meeting is first made. The stockholder's submission must
include certain specified information concerning the proposal or nominee, as the
case may be, and information as to the stockholder's ownership of Common Stock
of the Company.
OTHER MATTERS
Management does not know of any matters to be presented at the 2000 Annual
Meeting of Stockholders other than those set forth herein and in the Notice
accompanying this Proxy Statement.
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 1999 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 27, 2000
Sausalito, California
24
<PAGE>
EXHIBIT A
WILLIS LEASE FINANCE CORPORATION
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF APRIL 24, 2000)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of Willis Lease Finance Corporation, a California corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity programs:
(i) the Discretionary Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each
year in special option grants,
(iii) the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus
for services rendered the Corporation (or any Parent or Subsidiary),
(iv) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock, and
(v) the Director Fee Option Grant Program under which non-employee Board
members may elect to have all or any portion of their annual retainer fee
and attendance fees otherwise payable in cash applied to special option
grants.
B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. However, any discretionary option grants or
stock issuances for members of the Primary Committee shall be made by a
disinterested majority of the Board.
B. Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons. The members of the Secondary
Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at
<PAGE>
any time terminate the functions of any Secondary Committee and reassume all
powers and authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. The Primary Committee shall have the sole and exclusive authority to
determine which Section 16 Insiders and other highly compensated employees shall
be eligible for participation in the Salary Investment Option Grant Program for
one or more calendar years. However, all option grants under the Salary
Investment Option Grant Program shall be made in accordance with the express
terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
F. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
G. Administration of the Automatic Option Grant and Director Fee Option
Grant Programs shall be self-executing in accordance with the terms of those
programs, and no Plan Administrator shall exercise any discretionary functions
with respect to any option grants or stock issuances made under those programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.
C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i) with respect
to the option grants under the Discretionary Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
2
<PAGE>
D. The Plan Administrator shall have the absolute discretion either to grant
options in accordance with the Discretionary Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the Automatic
Option Grant Program shall be limited to (i) those individuals serving as
non-employee Board members on the Underwriting Date, (ii) those individuals who
first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the Underwriting Date. A
non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
option grant under the Automatic Option Grant Program at the time he or she
first becomes a non-employee Board member, but shall be eligible to receive
periodic option grants under the Automatic Option Grant Program while he or she
continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to participate in the
Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 1,525,000
shares. Such authorized share reserve is comprised of (i) 525,000 shares
initially reserved for issuance under the Plan, (ii) an additional increase of
500,000 shares authorized by the Board on February 24, 1998, and approved by the
stockholders at the 1998 Annual Meeting and (iii) an additional increase of
500,000 shares authorized by the Board on April 4, 2000 subject to stockholder
approval at the 2000 Annual Meeting.
B. No one person participating in the Plan may receive options, separately
exercisable stock appreciation rights and direct stock issuances for more than
250,000 shares of Common Stock in the aggregate per calendar year, beginning
with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options shall be available
for subsequent issuance under the Plan to the extent those options expire or
terminate for any reason prior to exercise in full. Unvested shares issued under
the Plan and subsequently cancelled or repurchased by the Corporation, at the
original issue price paid per share, pursuant to the Corporation's repurchase
rights under the Plan shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan and shall accordingly be available
for reissuance through one or more subsequent option grants or direct stock
issuances under the Plan. However, should the exercise price of an option under
the Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
or the vesting of a stock issuance under the Plan, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised or which vest under the stock
issuance, and not by the net number of shares of Common Stock issued to the
holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan,
(ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program to new and continuing non-employee Board
members, (iv) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved
by the Plan Administrator; PROVIDED, however, that each such document shall
comply with the terms specified below. Each document evidencing an Incentive
Option shall, in addition, be subject to the provisions of the Plan applicable
to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan Administrator
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Five and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment
of the exercise price for the purchased shares must be made on the Exercise
Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any options held
by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation of
Service for any reason shall remain exercisable for such period of time
thereafter as shall be determined by the Plan Administrator and set forth in
the documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the
time of death may be subsequently exercised by the personal representative
of the Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution.
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(iii) Should the Optionee's Service be terminated for Misconduct, then
all outstanding options held by the Optionee shall terminate immediately and
cease to be outstanding.
(iv) During the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable on the date of the Optionee's cessation
of Service. Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding to
the extent the option is not otherwise at that time exercisable for vested
shares.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the
Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall NOT be subject to the terms of this Section II.
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A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted
is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same,
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year.
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E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within twelve (12) months following the effective
date of any Corporate Transaction in which those options are assumed or replaced
and do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate, and the shares subject
to those terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have the discretion, exercisable either at
the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:
(i) One or more Optionees may be granted the right, exercisable upon
such terms as the Plan Administrator may establish, to elect between the
exercise of the underlying option for shares of Common Stock and the
surrender of that option in exchange for a distribution from the Corporation
in an amount equal to the excess of (a) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion thereof) over
(b) the aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless it is approved
by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be
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made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the
option surrender date and may exercise such rights at any time prior to the
LATER of (a) five (5) business days after the receipt of the rejection
notice or (b) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the option
grant date.
C. The following terms shall govern the grant and exercise of limited stock
appreciation rights:
(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each individual holding
one or more options with such a limited stock appreciation right shall have
the unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the Corporation, to
the extent the option is at the time exercisable for vested shares of Common
Stock. In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the excess of
(A) the Take-Over Price of the shares of Common Stock which are at the time
vested under each surrendered option (or surrendered portion thereof) over
(B) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) The Plan Administrator shall pre-approve, at the time the limited
stock appreciation right is granted, the subsequent exercise of that right
in accordance with the terms of the grant and the provisions of this
Section V.C. No additional approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.
(iv) The balance of the option (if any) shall continue in full force and
effect in accordance with the documents evidencing such option.
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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for those calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00) (or the appropriate amount with respect to
elections made by newly eligible individuals during a calendar year). The
Primary Committee shall have complete discretion to determine whether to approve
the filed authorization in whole or in part. To the extent the Primary Committee
approves the authorization, the individual who filed that authorization shall
automatically be granted an option under the Salary Investment Grant Program on
the first trading day in January of the calendar year for which the salary
reduction is to be in effect, or, if the Program is first implemented during a
calendar year, the option shall be granted on the first trading day of the month
following the month in which the Program is implemented.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
(i) The exercise price per share shall be thirty-three and one-third
percent (33 1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
(ii) The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A DIVIDED BY (B X 66 2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the Optionee's base
salary for the calendar year, and
B is the Fair Market Value per share of Common Stock on the option grant
date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten
(10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service for
any reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
EARLIER of
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(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Service.
Should the Optionee die while holding one or more options under this Article
Three, then each such option may be exercised, for any or all of the shares for
which the option is exercisable at the time of the Optionee's cessation of
Service (less any shares subsequently purchased by Optionee prior to death), by
the personal representative of the Optionee's estate or by the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution. Such right of exercise
shall lapse, and the option shall terminate, upon the EARLIER of (i) the
expiration of the ten (10)-year option term or (ii) the three (3)-year period
measured from the date of the Optionee's cessation of Service. However, the
option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program, to the extent not already vested, shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Each such outstanding option shall terminate immediately following the Corporate
Transaction, except to the extent assumed by the successor corporation (or
parent thereof) in such Corporate Transaction. Any option so assumed and shall
remain exercisable for the fully-vested shares until the earlier of (i) the
expiration of the ten (10)- year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The option shall remain so exercisable until the EARLIER of (i) the expiration
of the ten (10)-year option term, (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service or
(iii) the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each outstanding
option granted him or her under the Salary Investment Option Grant Program. The
Optionee shall in return be entitled to a cash distribution from the Corporation
in an amount equal to the excess of (i) the Take-Over Price of the shares of
Common Stock at the time subject to the surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. The Primary Committee shall, at the time the option with such
limited stock appreciation right is granted under the Salary Investment Option
Grant Program, pre-approve any subsequent exercise of that right in accordance
with the terms of this Paragraph C. Accordingly, no further approval of the
Primary Committee or the Board shall be required at the time of the actual
option surrender and cash distribution.
D. The grant of options under the Salary Investment Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan Administrator,
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five, shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance Program may, in
the discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant's period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or the
performance objectives to be attained,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse between
installments, and
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further
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stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation rights under
the Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase/cancellation rights are to be assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within
twelve (12) months following the effective date of any Corporate Transaction in
which those repurchase/cancellation rights are assigned to the successor
corporation (or parent thereof).
C. The Plan Administrator shall have the discretion, exercisable either at
the time the unvested shares are issued or at any time while the Corporation's
repurchase rights remain outstanding, to (i) provide for the automatic
termination of one or more outstanding repurchase/cancellation rights and the
immediate vesting of the shares of Common Stock subject to those rights upon the
occurrence of a Change in Control or (ii) condition any such accelerated vesting
upon the subsequent Involuntary Termination of the Participant's Service within
a specified period following the effective date of such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee
Board member shall automatically be granted, on the date of such initial
election or appointment, a Non-Statutory Option to purchase 5,000 shares of
Common Stock, provided that individual has not previously been in the employ
of the Corporation or any Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting, each individual who
is to continue to serve as an Eligible Director, whether or not that
individual is standing for re-election to the Board at that particular
Annual Meeting, shall automatically be granted a Non-Statutory Option to
purchase a specified number of shares of 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 10,000 shares of Common Stock. There shall be no limit on the number
of such $20,000-value option grants any one Eligible Director may receive
over his or her period of Board service, and non-employee Board members who
have previously been in the employ of the Corporation (or any Parent or
Subsidiary) or who have otherwise received a stock option grant from the
Corporation shall be eligible to receive one or more such annual option
grants over their period of continued Board service.
Stockholder approval of this 1999 Restatement at the 1999 Annual Meeting
shall constitute pre-approval of each option granted under this Article Five on
or after the date of that Annual Meeting and the subsequent exercise of that
option in accordance with the provisions of this Article Five.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years measured
from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 5,000-share grant shall vest, and
the Corporation's repurchase right shall lapse, in a series of four
(4) successive equal annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon the
Optionee's completion of one (1) year of Board service measured from the option
grant date. Each annual $20,000 value grant shall vest, and the Corporation's
repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
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E. TERMINATION OF BOARD SERVICE. The following provisions shall govern the
exercise of any options held by the Optionee at the time the Optionee ceases to
serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to exercise
each such option.
(ii) During the twelve (12)-month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of
Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the
option shall immediately vest so that such option may, during the twelve
(12)-month exercise period following such cessation of Board service, be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)-month
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service for any reason
other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each automatic
option held by him or her. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. Stockholder approval of this 1999
Restatement at the 1999 Annual Meeting shall constitute pre-approval of each
option granted with such a surrender provision on or after the date of that
Annual Meeting and the subsequent surrender of that option in accordance with
the provisions of this
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Section II.C. No additional approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.
D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
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ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any portion of the
annual retainer and attendance fees otherwise payable in cash for his or her
service on the Board to the acquisition of special option grants under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee and attendance fees which are the subject of
that election are otherwise payable, or, with respect to newly eligible
non-employee Board members, prior to the first day of the fiscal quarter
beginning after they became eligible. Each non-employee Board member who files
such a timely election shall automatically be granted an option under this
Director Fee Option Grant Program at the end of each fiscal quarter in the
calendar year for which the annual retainer and attendance fees which are the
subject of that election would otherwise be payable in cash.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and one-third percent
(33 1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A DIVIDED BY (B X 66 2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee plus the portion of any
attendance fees earned during the quarter subject to the non-employee Board
member's election, and
B is the Fair Market Value per share of Common Stock on the option grant
date.
C. EXERCISE AND TERM OF OPTIONS. The option shall be fully vested at the
time of grant. Each option shall have a maximum term of ten (10) years measured
from the option grant date.
D. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board service
for any reason (other than death or Permanent Disability) while holding one or
more options under this Director Fee Option Grant Program, then each such option
shall remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the EARLIER of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service.
E. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a Board
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Director Fee Option Grant Program may be exercised
for any or all of those shares as fully-vested shares until the EARLIER of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service.
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Should the Optionee die after cessation of Board service but while holding
one or more options under this Director Fee Option Grant Program, then each such
option may be exercised, for any or all of the shares for which the option is
exercisable at the time of the Optionee's cessation of Board service (less any
shares subsequently purchased by Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Such right of exercise shall lapse, and the
option shall terminate, upon the EARLIER of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)-year period measured from the date
of the Optionee's cessation of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program, to the extent the option is not already vested, shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all the
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall terminate immediately following the Corporate
Transaction, except to the extent assumed by the successor corporation (or
parent thereof) in such Corporate Transaction. Any option so assumed and shall
remain exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall remain exercisable until the EARLIER or (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each outstanding
option granted him or her under the Director Fee Option Grant Program. The
Optionee shall in return be entitled to a cash distribution from the Corporation
in an amount equal to the excess of (i) the Take-Over Price of the shares of
Common Stock at the time subject to each surrendered option over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall
be required in connection with such option surrender and cash distribution.
D. The grant of options under the Director Fee Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE SEVEN
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective with respect to the Discretionary Option Grant
and the Stock Issuance Programs immediately upon the Plan Effective Date. The
Automatic Option Grant Program became effective on the Underwriting Date. The
Director Fee Option Grant Program shall become effective upon shareholder
approval of the proposal to incorporate the program into the Plan at the 1999
Annual Meeting.
B. The Plan was amended and restated by the Board on February 24, 1998 (the
"1998 Restatement") to effect the following changes: (i) increase the maximum
number of shares of Common Stock authorized for issuance over the term of the
Plan from 525,000 shares to 1,025,000 shares, (ii) render the non-employee Board
members who are serving as Plan Administrator eligible to receive option grants
and direct stock issuances under the Discretionary Option Grant and Stock
Issuance Programs in effect under the Plan, (iii) remove certain restrictions on
the eligibility of non-employee Board members to serve as Plan Administrator,
and (iv) effect a series of additional changes to the provisions of the Plan
(including the stockholder approval requirements, the transferability of
Non-Statutory Options and the elimination of the six (6)-month holding
requirement as a condition to the exercise of stock appreciation rights) in
order to take advantage of the amendments to Rule 16b-3 of the 1934 Act which
exempts certain officer and director transactions under the Plan from the
short-swing liability provisions of the federal securities laws. The 1998
Restatement was approved by the stockholders at the 1998 Annual Meeting. All
option grants and direct stock issuances made prior to the 1998 Restatement
shall remain outstanding in accordance with the terms and conditions of the
respective instruments evidencing those options or issuances, and nothing in the
1998 Restatement shall be deemed to modify or in any way affect those
outstanding options or issuances. The Plan Administrator may make option grants
and direct stock issuances under the Plan at any time before the date fixed
herein for the termination of the Plan. The Plan was again amended and restated
by the Board on April 6, 1999 to (i) incorporate the Salary Investment Option
Grant and Director Fee Option Grant Programs 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. The Plan was again amended and
restated by the Board on April 4, 2000 and on April 24, 2000 to increase the
maximum
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number of shares of Common Stock authorized for issuance over the term of the
Plan from 1,025,000 shares to 1,525,000 shares and to increase the limit on the
annual Automatic Grants to non-employee directors to 7,500, subject to the
approval of the stockholders at the 2000 Annual Meeting.
C. The Plan shall terminate upon the EARLIEST of (i) June 19, 2006,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained stockholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of
any granted option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were still
in office at the time the Board approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from
the persons holding those securities immediately prior to such transaction,
or
(ii) the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
G. CORPORATION shall mean Willis Lease Finance Corporation, a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Willis Lease Finance Corporation which shall by
appropriate action adopt the Plan.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option
grant program in effect for non-employee Board members under Article Six of the
Plan.
J. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
K. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
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L. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
M. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
N. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National Market
or any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(iii) For purposes of any option grants made on the Underwriting Date,
the Fair Market Value shall be deemed to be equal to the price per share at
which the Common Stock is to be sold in the initial public offering pursuant
to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the Underwriting
Date, the Fair Market Value shall be determined by the Plan Administrator,
after taking into account such factors as it deems appropriate.
O. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.
P. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
Q. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in any corporate-
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
R. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or
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trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).
S. ACT shall mean the Securities Exchange Act of 1934, as amended.
T. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
U. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.
V. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
X. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
Y. PLAN shall mean the Corporation's 1996 Stock Option/Stock Issuance Plan,
as set forth in this document.
Z. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
AA. PLAN EFFECTIVE DATE shall mean June 21, 1996, the date on which the
Plan was adopted by the Board.
AB. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders.
AC. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
AD. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment
option grant program in effect under the Plan.
AE. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
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AF. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
AG. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AH. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
York Stock Exchange.
AI. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AJ. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
AK. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AL. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.
AM. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.
AN. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
AO. UNDERWRITING AGREEMENT shall mean the agreement between the Corporation
and the underwriter or underwriters who managed the initial public offering of
the Common Stock.
AP. UNDERWRITING DATE shall mean September 18, 1996, the date on which the
Underwriting Agreement was executed and priced in connection with the initial
public offering of the Common Stock.
A-4
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WILLIS LEASE FINANCE CORPORATION
PROXY
2000 ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles F. Willis, IV, Donald A. Nunemaker
and James D. McBride, 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 14, 2000 at the Annual Meeting of Stockholders of the Company to be
held on May 23, 2000, 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 II
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
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/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 II DIRECTORS
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
NOMINEES:
Donald E. Moffitt and Willard H. Smith
FOR ABSTAIN AGAINST
2. Proposal to (i) amend the 1996 Stock Option/Stock
Issuance Plan to increase the maximum number
of shares of common stock authorized for / / / / / /
issuance over the term of the Plan from
1,025,000 to 1,525,000, and (ii) increase the
maximum number of option shares that may be
granted annually to each, on-employee director
under the Automatic Grant Program from 5,000
shares to 10,000 shares.
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.
