AVIATION GENERAL, INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 16, 2000
The 2000 Annual Meeting of the Shareholders of Aviation General,
Incorporated, a Delaware corporation (the "Company"), will be held on Friday,
June 16, 2000 at 2:00 p.m. local time at 2600 Virginia Avenue, N.W., Suite 900,
Washington, D.C. for the following purposes:
1. To elect a Board of four Directors.
2. To approve an amendment to the Company's 1993 Stock Option Plan that would
increase the number of shares of common stock reserved for issuance
thereunder.
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only shareholders of record at the close of business on May 5, 2000 are
entitled to notice of and to vote at the meeting.
A majority of the Company's outstanding shares must be represented at
the meeting (in person or by proxy) to transact business. To assure proper
representation at the meeting, please mark, sign, and date the enclosed proxy
and mail it promptly in the enclosed self-addressed envelope. Your proxy will
not be used if you revoke such proxy either before or at the meeting.
Xuan T. Ho
Secretary
Dated: May 16, 2000
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IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
YOUR VOTE IS IMPORTANT.
- --------------------------------------------------------------------------------
<PAGE>
AVIATION GENERAL, INCORPORATED
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited on behalf of the Board of Directors of
Aviation General, Incorporated (the "Company") for use at the Annual Meeting of
Shareholders to be held Friday, June 16, 2000 at 2:00 p.m. local time, or at any
adjournment or postponement thereof. The Annual Meeting will be held at 2600
Virginia Avenue, N.W., Suite 900, Washington, D.C. The Company's principal
offices are located at 7200 Northwest 63rd Street, Hangar Eight, Wiley Post
Airport, Bethany, Oklahoma 73008, and its telephone number is (405)440-2255.
These proxy solicitation materials will be mailed to shareholders on or about
May 16, 2000.
Shareholders of record at the close of business on May 5, 2000 are
entitled to notice of, and to vote at, the Annual Meeting. On April 17, 2000,
6,513,786 shares of the Company's Common Stock were issued and outstanding. Each
share of common stock outstanding on the record date is entitled to one vote.
Votes Required for Approval
The three nominees for director receiving a plurality of the votes cast
at the meeting in person or by proxy shall be elected.
The amendment to the 1993 Stock Option Plan and all other matters will
be approved if the votes cast at the meeting in person or by proxy favoring the
action exceed the votes cast opposing the action. Abstentions and broker
non-votes will not be treated as votes cast and therefore will have no effect on
the outcome of the matters to be voted on at the Annual Meeting.
Any person may revoke a proxy at any time before its use by delivering
to the Company a written revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
The cost of this solicitation will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally, by telephone or otherwise.
Deadline for Receipt of Shareholder Proposals for 2001 Annual Meeting
Proposals of shareholders which are intended to be presented by such
shareholders at the Company's 2001 Annual Meeting must be received by the
Company no later than January 5, 2001.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 17, 2000 certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
any person known by the Company to be the beneficial owner of more than 5% of
the Company's voting securities, (ii) each director and each nominee for
director to the Company, (iii) each of the executive officers named in the
Summary Compensation Table appearing herein, and (iv) all executive officers and
directors of the Company as a group.
Number of Percent
Name Shares of Total
- --------------------------------------------------------------------------------
KuwAm Corporation 4,761,465 73.1%
2600 Virginia Avenue, N.W.
Washington, D.C. 20037 (1)
Special Situation Investment Holdings, Ltd. 4,332,534 66.5%
c/o KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, D.C. 20037 (1)
Mishal Yousef Saud Al Sabah (2)(4) 294,038 4.5%
Wirt D. Walker, III (3)(4) 352,479 5.4%
N. Gene Criss (4) 153,334 2.4%
Stephen R. Buren (4) 5,600 *
Dean N. Thomas (4) 35,000 *
All Officers and Directors 840,451 12.9%
as a Group (5 persons) (5)
- ---------------------
* Less than one percent
(1) KuwAm Corporation, a Washington, D.C. based private investment firm, is the
general partner of Special Situation Investment Holdings, Ltd. ("SSIH"),
the Company's majority shareholder. The shareholders of KuwAm include Wirt
D. Walker, III, the Chairman and Chief Executive Officer of the Company,
and Mishal Yousef Saud Al Sabah, a director of the Company. Mr. Walker is
also the Managing Director of KuwAm. Shares beneficially owned by KuwAm
consists of 4,332,534 shares held by SSIH and 428,931 shares held by KuwAm.
(2) Includes 191,000 owned by Fifth Floor Company of which Mr. Al Sabah is a
principal. Does not include shares Mr. Al Sabah may be deemed to own
beneficially by virtue of his membership in the KuwAm Group.
<PAGE>
(3) Includes 30,000 shares owned by a trust for Mr. Walker's son, of which Mr.
Walker is the trustee. Mr. Walker also has sole voting and dispositive
power with respect to shares owned by SSIH and KuwAm. Does not include
shares Mr. Walker may be deemed to own beneficially by virtue of his
membership in the KuwAm Group.
(4) Includes shares issuable upon exercise of options that are exercisable
within 60 days, as follows: Mr. Al Sabah, 60,000 shares; Mr. Walker, 93,333
shares; Mr. Criss, 153,334 shares; and Mr. Thomas, 35,000 shares.
(5) At April 17, 2000, executive officers and directors of the Company as a
group (5 persons) held options to purchase an aggregate of 1,705,184 shares
of Common Stock, representing approximately 56.1% of outstanding options at
that date. The numbers set forth in this table include an aggregate of
341,667 shares which are currently exercisable within 60 days of such date.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of four directors is to be elected at the Annual Meeting.
Unless marked to the contrary, all properly signed and returned proxies will be
voted for the election of management's three nominees named below, all of whom
are presently directors of the Company. If any nominee is unable or, for good
cause, declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee designated by the present Board of
Directors to fill the vacancy. The Company is not aware of any nominee who will
be unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until a successor has been elected and qualified.
The following sets forth certain information regarding each of the
nominees for election as director:
Wirt D. Walker, III, age 54, has served as a director of the Company
from September 1989 to February 1991, as Chairman of the Board of Directors
since May 1991 and as Chief Executive Officer since June 1998. Mr. Walker
previously served as the Company's Chief Executive Officer from May 1991 to
August 1991 and from December 1992 to May 1995. Since 1982, Mr. Walker has
served as a director and the Managing Director of KuwAm Corporation, a private
investment firm. He is the Chairman and Chief Executive Officer of STRATESEC
Incorporated, a publicly traded company that provides technology-based security
solutions for medium and large commercial and government facilities.
N. Gene Criss, age 57, served as President and Chief Executive Officer
of the Company from May 1995 to June 1998. Mr. Criss served as President and
Chief Operating Officer from December 1994 to May 1995, as Executive Vice
President and Chief Operating Officer from November 1992 to December 1994 and as
a director since August 1993. He served as Vice President, Manufacturing at
American General Aircraft Company, a manufacturer of light single engine general
aviation aircraft, from July 1992 to November 1992. Prior to July 1992, Mr.
Criss held a variety of positions of increasing responsibility during a
twenty-two year career at Piper Aircraft Corporation, including service as
Director of Materials and Manufacturing Support from 1982 to June 1992. During
his tenure with Piper Aircraft Corporation, Mr. Criss was responsible for
corporate scheduling, production and material control, inventory control and
engineering administration.
Mishal Yousef Saud Al Sabah, age 38, is a private investor who has been
involved in a broad range of investment activities in the United States and
overseas for the past nineteen years. Mr. Al Sabah has been a director of the
Company since 1991. He has served as the Chairman of the Board of Directors of
KuwAm Corporation since 1982 and is a director of STRATESEC Incorporated.
Stephen R. Buren, age 56, served as Chief Financial Officer of the
Company from May 1991 to March 2000, and served as Vice President, Finance and
Treasurer of the Company from 1990 to 1991. Mr. Buren has served as a director
of the Company since April 2000. He was Vice President, Finance and Treasurer of
Mycro-Tek, Inc. from 1987 to 1990, and was Vice President, Finance of Health
Technologies, Inc. from 1986 to 1987. From 1974 to 1986 he held division and
corporate controllership positions at Cessna Aircraft Company.
Director Compensation
Directors are paid an annual fee of $20,000, payable in equal quarterly
installments, for services as a director. Such fees are prorated when a director
does not serve for a full year. Directors receive no additional compensation for
committee participation or attendance at committee meetings, other than
reimbursement of travel and lodging expenses.
The 1993 Stock Option Plan provides for the automatic annual grant of a
stock option to purchase 20,000 shares of Common Stock to each eligible
non-employee and employee director of the Company; non-employee directors will
automatically receive a nonstatutory stock option and employee directors will
automatically receive an incentive stock option. The 1999 annual automatic
options were granted to each of the three directors on December 20, 1999.
Board Meetings and Committees
The Board of Directors held a total of three meetings during the fiscal
year ended December 31, 1999. The Board has two committees: the Audit Committee
and the Compensation Committee.
The Audit Committee, comprised of Messrs. Criss and Al Sabah,
recommends the selection of the Company's independent accountants and approves
the scope of the audit to be conducted. The Committee is primarily responsible
for reviewing and evaluating the Company's accounting practices and its systems
of internal accounting controls. The Audit Committee held one meeting during
fiscal 1999.
The Compensation Committee recommends the amount and type of
compensation to be paid to the Company's executive officers, reviews the
performance of the Company's key employees, and administers and determines
distributions under the Company's Profit Sharing Plan. The Compensation
Committee will also determine the number of shares, if any, to be granted each
employee under such plan and the terms of such grants. The Compensation
Committee held two meetings during fiscal 1999.
No director attended fewer than 75% of all meetings of the Board of
Directors held during fiscal 1999 or of all meetings of any committee upon which
such director served during fiscal 1999.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Al Sabah and Criss
Neither Messrs. Al Sabah or Criss is currently an officer or employee
of the Company. They are not eligible to participate in the Company's Profit
Sharing Plan. Both receive compensation for services as a director (See
"Director Compensation"), and Mr. Criss receives compensation under a consulting
agreement with the Company. Mr. Criss served as President and Chief Executive
Officer of the Company from May 1995 to June 1998. Mr. Al Sabah is a director
and shareholder of KuwAm Corporation, the corporate general partner of SSIH, the
majority shareholder of the Company.
Other Officers
Dean N. Thomas, age 45, has served as Senior Vice President - Sales &
Marketing since January 1995. He was President of Strategic Marketing Resources,
a marketing consulting firm, from 1990 to 1994, and held various positions at
Piper Aircraft Corporation from 1981 to 1990, including Director of Marketing
and Director of Product Development.
Ronald F. Thomason, age 33, succeeded Mr. Buren as Chief Financial
Officer and Vice President, Finance of the Company on April 1, 2000. He held
various positions at Wood Group ESP, Inc., a manufacturing and service company,
from 1995 to 2000, most recently as Controller - North American Operations. From
1990 to 1995, he held audit and staff positions with Price Waterhouse and
Kerr-McGee Corporation.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows certain information concerning the
compensation of each of the Company's executive officers for services rendered
in all capacities to the Company for the fiscal years ended 1999, 1998, and
1997.
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
Securities
Underlying
Other Annual Options Awarded
compensation (in shares)
Year Salary (1) Bonus (2)
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wirt D. Walker, III 1999 $80,000 -- $ 20,000 145,000
Chairman and Chief Executive 1998 $36,923 -- $ 20,000 95,000
Officer 1997 -- -- $ 20,000 20,000
Stephen R. Buren 1999 $92,000 -- -- 75,000
Vice President, Chief Financial 1998 $87,423 -- -- 22,500
Officer and Treasurer 1997 $81,923 -- -- 10,000
Dean N. Thomas 1999 $75,000 $51,881 -- 50,000
Senior Vice President - Sales and 1998 $73,654 $39,361 -- 20,000
Marketing 1997 $75,000 $18,500 -- 10,000
N. Gene Criss 1999 -- -- $65,000 (3) 30,000
Director 1998 $77,705 -- $48,750 240,000
1997 $125,000 -- $20,000 60,000
</TABLE>
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(1) Salary and bonus payments include voluntary salary reduction contribution
to the Company's 401(k) Savings Plan.
(2) Amounts paid as director fees unless otherwise indicated.
(3) Mr. Criss joined the Company in November 1992 and became a director in
August 1993. Mr. Criss resigned as President and Chief Executive Officer in
June 1998, at which time he entered into a consulting agreement with the
Company under which he receives $65,000 per year.
Option Grants in Last Fiscal Year
The Committee approved the following stock option grants for the
executive officers during fiscal year 1999.
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for Option
Underlying Granted to Term
Options Employees in Exercise Expiration
Name Granted (1) Fiscal Year Price Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wirt D. Walker, III 25,000 4% $1.75 4/25/02 $6,896 $14,481
100,000 14% $1.50 9/05/02 $23,644 $49,650
20,000 3% $1.38 12/20/04 $7,598 $16,789
------ --
145,000 21%
Stephen R. Buren 25,000 4% $1.75 4/25/02 $6,896 $14,481
50,000 7% $1.50 9/05/02 $11,822 $24,825
------ --
75,000 11%
Dean N. Thomas 25,000 4% $1.75 4/25/02 $6,896 $14,481
25,000 4% $1.50 9/05/02 $5,911 $12,413
------ --
50,000 7%
</TABLE>
- ---------------------
(1) Each option is non-transferable; vests as to 33% of the shares covered
by such option over three years, commencing on the first anniversary of
the date of issuance; is canceled prior to vesting in the event the
holder either resigns from the Company or is terminated for justifiable
cause; and is void after the date listed under the heading "Expiration
Date." The exercise price of the stock subject to options was equal to
the market value on the date of grant. The number of shares issuable
upon exercise of each option is subject to adjustment subsequent to any
stock dividend, split-up, recapitalization or certain other
transactions.
During 1999, Messrs. Walker, Al Sabah and Criss, directors of the
Company, were each granted an option to purchase 20,000 shares of
Common Stock pursuant to the 1993 Stock Option Plan.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and holders of more than ten percent
of the Company's Common Stock to file reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
The Company believes that during the fiscal year ended December 31, 1998, its
officers, directors and holders of more than 10% of the Company's Common Stock
complied with all Section 16 (a) filing requirements.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table shows the number of shares of Common Stock acquired
by the executive officers upon the exercise of stock options during fiscal 1999,
the net value realized at exercise, the number of shares of Common Stock
represented by outstanding stock options held by each executive officer as of
December 31, 1999 and the value of such options based on the closing price of
the Company's Common Stock on December 31, 1999, which was $1.38.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY End (#) (1) FY End ($) (2)
----------------------------------------------------
Number of Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Wirt D. Walker, III -- -- 85,000/215,000 $-/$-
Stephen R. Buren -- -- 24,167/93,333 $-/$-
Dean N. Thomas -- -- 23,334/66,666 $-/$-
</TABLE>
- --------------------------
(1) Represents the total number of shares subject to stock options held by each
executive officer. These options were granted on various dates during
fiscal years 1994 through 1999 and are exercisable on various dates
beginning in 1999 and expiring in 2004.
(2) Represents the difference between the exercise price and $1.38, which was
the December 31, 1999 closing price. Stock option exercise prices range
from $1.38 to $5.25.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
is composed of N. Gene Criss and Mishal Yousef Saud Al Sabah. The Committee is
charged with the responsibility for reviewing the performance and approving the
compensation of key executives and for establishing general compensation
policies and standards for reviewing management performance. The Committee also
reviews both corporate and key executive performance in light of established
criteria and goals and approves individual key executive compensation.
Compensation Philosophy
The executive compensation philosophy of the Company is to provide
competitive levels of compensation that advance the Company's annual and
long-term performance objectives, reward corporate performance, and assist the
Company in attracting, retaining and motivating highly qualified executives. The
framework for the Committee's executive compensation programs is to establish
base salaries which are competitive with similarly sized companies and to create
incentives for excellent performance by providing executives with the
opportunity to earn additional remuneration linked to the Company's
profitability. The incentive plan goals are designed to improve the
effectiveness and enhance the efficiency of Company operations and to create
value for stockholders. It is also the Company's policy to encourage share
ownership by executive officers and non-employee directors through the grant of
stock options.
Components of Compensation
The compensation package of the Company's executive officers consists
of base annual salary, participation in the Company's Profit Sharing Plan and
stock option grants.
At executive levels, base salaries are reviewed but not necessarily
increased annually. Base salaries are fixed at levels slightly below competitive
amounts paid to individuals with comparable qualifications, experience and
responsibilities engaged in similar businesses as the Company, based on the
experience of the Committee members, directors and employees of the Company
within the aviation industry.
The Company has adopted a Profit Sharing Plan which is intended to
advance the interests of the Company by providing eligible employees with an
annual incentive to increase the productivity of the Company. Unless the Board
of Directors determines otherwise prior to the end of a fiscal year, the Profit
Sharing Plan provides for payment to selected employees of an aggregate of 10%
of the consolidated pre-tax profits of the Company for the fiscal year. The
Compensation Committee administers the Profit Sharing Plan and selects the
employees who will receive profit sharing awards. Profit sharing awards are
based upon an employee's salary, level of responsibility and attainment of
performance goals and objectives. Profit sharing awards are paid as soon as
practicable following the end of the fiscal year.
The Company uses stock options both to reward past performance and to
motivate future performance, especially long-term performance. The Committee
believes that through the use of stock options, executive interests are directly
tied to enhancing shareholder value. Stock options are granted at fair market
value as of the date of grant and generally have a term of three to five years.
The options vest 33% per year, beginning on the first anniversary date of the
grant. The stock options provide value to the recipients only when the market
price of the Company's Common Stock increases above the option grant price and
only as the shares vest and become exercisable.
Section 162(m) of the Internal Revenue Code, which provides for a
$1,000,000 limit on the deductibility of compensation, presently is not
applicable to the Company. The Committee will review its policy with respect to
Section 162(m) when and if the section is applicable in the future.
Compensation of Chief Executive Officer
The Committee makes decisions regarding the compensation of the Chief
Executive Officer using the same philosophy set forth above. The Committee's
approach in setting the Chief Executive Officer's base compensation, as with
that of the Company's other executives, is to be competitive with other
companies within the industry, taking into consideration company size, operating
conditions and compensation philosophy and performance. Mr. Walker's base salary
was not increased during fiscal 1999. Mr. Walker's fiscal 1999 incentive
compensation was earned under the same performance criteria that were described
previously in this report. He was granted options to purchase a total of 145,000
shares of the Company's common stock during fiscal 1999, of which 20,000 shares
represents the automatic grant to directors.
COMPENSATION COMMITTEE
N. Gene Criss
Mishal Yousef Saud Al Sabah
<PAGE>
PROPOSAL TWO
AMENDMENT OF 1993 STOCK OPTION PLAN
Introduction
The Board of Directors of the Company has unanimously approved a
resolution, subject to shareholder approval, approving an amendment to the
Company's 1993 Stock Option Plan (the "Plan") to increase the number of shares
of Common Stock that may be issued pursuant to stock options granted thereunder
by 750,000 shares. Before giving effect to the proposed amendment, 77,069 shares
of Common Stock remain available for issuance pursuant to the Plan.
The Board of Directors recommends that shareholders vote for the
amendment of the Plan. The Board believes the Plan provides a means for key
employees and directors upon whose judgment and interest the Company is and will
be largely dependent for the successful conduct of its business to increase
their personal ownership interest in the Company. It is believed that such
incentive awards will further the identification of directors' and key
employees' interests with those of the Company. No determination has been made
as to the amount of options to be granted to any individual.
A summary of the Company's 1993 Stock Option Plan follows.
Eligibility
All employees of the Company or any parent or subsidiary of the Company
whom the Committee determines to be key employees are eligible to receive stock
options under the Plan. The Company estimates that it currently has
approximately fifteen such employees (three of whom are officers).
The Plan also provides that both employee directors and non-employee
directors are eligible for automatic grants of options. A non-employee director
is eligible to receive an option under the Plan if such director is not
otherwise an employee of the Company or any subsidiary and was not an employee
of the Company or subsidiary for a period of at least one year before the date
of grant of an option under the Plan. Three members of the Board presently
qualify for the automatic grant of options under the Plan.
Administration
The Plan will be administered by the Compensation Committee, which is
comprised of at least two directors of the Company who are not eligible for
discretionary grants of options under the Plan or any similar plan of the
Company. In addition to having general supervisory and interpretive authority
over the Plan, the Committee determines, upon the recommendation of management
and subject to the terms and limits of the Plan, the employees, if any, to whom
options will be granted, the time at which options are to be granted, the number
of shares to be subject to each option, and the terms and conditions of exercise
of options.
Award of Stock Options
Employees. Options to purchase shares of Common Stock granted to
employees under the Plan may be incentive stock options or nonstatutory stock
options. Incentive stock options qualify for favorable income tax treatment
under Code Section 422, while nonstatutory stock options do not. The exercise
price of shares of Common Stock covered by an incentive stock option may not be
less than 100% (or, in the case of an incentive stock option granted to a 10%
shareholder, 110%) of the fair market value of the Common Stock on the date of
the option grant. The option price of Common Stock covered by a nonstatutory
stock option granted to an employee may not be less than 85% of the fair market
value of the Common Stock on the date of grant.
An incentive stock option shall be exercisable in any calendar year
only to the extent that the aggregate fair market value (determined at the date
of grant) of the Common Stock with respect to which incentive stock options are
exercisable for the first time during the calendar year does not exceed
$100,000.
Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement; provided
that, the exercise provisions for incentive stock options shall in all events
not be more liberal than certain restrictions set forth in the Plan.
Directors. Each eligible non-employee director and employee director of
the Company on the effective date of the Plan, and subsequently on each
anniversary of the effective date of the Plan, automatically will receive an
option to purchase 20,000 shares of Common Stock. Eligible directors may receive
multiple annual automatic grants of options pursuant to the terms of the Plan.
The terms and conditions that apply to each such automatic grant shall
be as follows: (a) the exercise price per share of Common Stock covered by each
such option shall be equal to the fair market value on the date of grant; (b)
the option by its term shall expire five years after the date of grant; (c) each
option shall be exercisable ratably over three years in increments of 33 1/3%
per year commencing on the first anniversary of the date of grant; (d) the
option may be exercised by one of the methods described in "Exercise of
Options"; and (e) all other terms and conditions applicable to the holding and
exercise of the option shall conform to the Company's then current form of
option agreement to the extent not inconsistent with the terms of the Plan
applicable to incentive stock options.
General
If a stock option is canceled, terminates or lapses unexercised, any
unissued shares allocable to such option may be subjected again to an option.
The Committee is expressly authorized to make an award to a Plan Participant
(other than a non-employee director) conditioned upon the surrender for
cancellation of an existing stock option.
Adjustments will be made in the number of shares which may be issued
under the Plan in the event of a future stock dividend, stock split or similar
pro rata change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
options for the purchase of Company Common Stock or preferred stock.
Exercise of Options
Generally, an option may only be exercised by payment of the full
purchase price in cash. If the option so provides, the option may be exercised
by delivering an exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
from the option shares to pay the exercise price. An option may be exercisable
on or after the date of grant.
Transferability of Stock Options
No option may be sold, transferred, pledged, or otherwise disposed of,
other than by will or by the laws of descent and distribution. All rights
granted to a participant under the Plan shall be exercisable during his or her
lifetime only by such participant, or the participant's guardians or legal
representatives. Upon the death of a participant, his or her personal
representative or beneficiary may exercise the participant's rights under the
Plan.
Amendment of the Plan and Stock Options
The Board of Directors may amend the Plan in such respects as it deems
advisable; provided that the shareholders of the Company must approve any
amendment that would (i) materially increase the benefits accruing to
participants under the Plan, (ii) materially increase the number of shares of
Common Stock that may be issued under the Plan, or (iii) materially modify the
requirements of eligibility for participation in the Plan. Stock options granted
under the Plan may be amended with the consent of the recipient so long as the
amended award is consistent with the terms of the Plan.
Federal Income Tax Consequences
An employee or director will not incur federal income tax when he or
she is granted a stock option.
Upon exercise of a nonstatutory stock option, an employee or director
generally will recognize ordinary income (which in the case of an employee is
subject to income tax withholding by the Company) equal to the difference
between the fair market value of the Common Stock on the date of the exercise
and the option price. When an employee exercises an incentive stock option, he
generally will not recognize income, unless he is subject to the alternative
minimum tax. Non-employee directors are not granted incentive stock options
under the Plan.
The Company usually will be entitled to a business expense deduction at
the time and in the amount that the recipient of an incentive award recognizes
ordinary compensation income in connection therewith. As stated above, this
usually occurs upon exercise of nonstatutory options or the sale or other
impermissible disposition of an incentive stock option before the applicable
holding period has expired.
Generally, the Company's deduction is contingent upon the Company's
meeting withholding tax requirements as to employees; however, tax legislation,
enacted August 10, 1993, generally imposes a $1,000,000 limitation on the amount
of the annual compensation deduction allowable to a publicly-held company in
respect of its chief executive officer and its four most highly paid officers.
An exception is provided for certain performance-based compensation if certain
shareholder approval and outside director requirements are satisfied. Because of
certain interpretational issues under the statutory provisions, and in the
absence of Internal Revenue Service regulations, there can be no assurance that
any of the options granted under the Plan will qualify for this exception. No
deduction is allowed in connection with an incentive stock option, unless the
employee disposes of Common Stock received upon exercise in violation of the
holding period requirements.
Vote Required
Approval of the proposal to amend the Plan requires the affirmative
vote of the majority of the shares present in person or by proxy at the Annual
Meeting.
The Board of Directors recommends that you vote "FOR" the proposal to
amend the 1993 Stock Option Plan.
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this Proxy Statement a line-graph presentation comparing cumulative,
five year shareholder returns on an indexed basis with (i) a broad equity market
index and (ii) either an industry index or peer group. The following graph
compares the percentage change in the cumulative total stockholder return on the
Company's Common Stock against the cumulative total return of the Nasdaq Stock
Market-US Index and the Standard & Poor's Aerospace/Defense Industry Index.
Total return for the purpose of this graph assumes reinvestment of all
dividends, if any. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
Graph produced by Research Data Group.
<TABLE>
<CAPTION>
Cumulative Total Return
12/94 12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C> <C>
Aviation General, Incorporated 100.0 74.36 41.03 48.72 61.54 28.21
NASDAZ Stock Market (U.S.) 100.0 141.33 173.89 213.07 300.25 542.43
S7P Aerospace/Defense 100.0 165.48 221.35 227.72 174.57 170.06
</TABLE>
<PAGE>
CERTAIN TRANSACTIONS
The Company extends financing for aircraft and spare parts sold either
to Mishal Yousef Al Sabah, a director of the Company, or to Commander
International, a Commander Authorized Sales and Service Representative that is
owned by Mr. Al Sabah, under a line of credit of $5,000,000. All outstanding
advances under this line of credit and accrued interest thereon are due on June
30, 2000. The line of credit bears interest at 1% over the Morgan Guaranty of
New York prime rate (9.5% at December 31, 1999), payable quarterly, in arrears.
During 1999, the Company sold a used aircraft for $493,000 under this line of
credit. Commander International made principle payments of $265,000 and interest
payments of $288,132.
During 1998, the Company purchased debt securities with detachable
stock purchase warrants for $1,000,000 from STRATESEC Incorporated. The debt
securities carried an interest rate of 10% annually, were due on December 31,
1999 and convertible into common stock of STRATESEC at $8.50 per share. The
Company was also issued warrants to purchase 100,000 shares of STRATESEC common
stock at an exercise price of $2.50 per share expiring three years from the date
of issuance. In February 1999, the Company accepted a prepayment of 80%
($800,000) of the principal amount of the debt securities, in return for which
the Company agreed to accelerate the expiration date of the accompanying 100,000
warrants to December 31, 1999, which expired unexercised. The Company converted
the remaining $200,000 principal amount of the debt securities into 133,333
shares of STRATESEC common stock at a conversion price of $1.50 per share in
September 1999. The Company also purchased, via a private placement transaction,
66,667 shares of STRATESEC common stock at $1.50 per share in November 1999.
In March 1999 the Company's Board of Directors authorized the purchase
of up to 1,000,000 shares of the Company's common stock. The Company purchased a
total of 636,334 shares of its common stock from the majority stockholder of the
Company at an average price of $1.45 per share pursuant to this authorization.
In March 2000, the Company's Board of Directors authorized the additional
purchase of up to 2,000,000 shares of the Company's common stock, of which
60,000 shares have been purchased to date from the Company's majority
stockholder at an average price of $3.75 per share.
INDEPENDENT AUDITORS
The Board of Directors has approved a resolution retaining Grant
Thornton LLP as its independent auditors for fiscal 2000.
A representative of Grant Thornton LLP will be present at the Annual
Meeting and will have an opportunity at the meeting to make a statement if he
desires to do so and will be available to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
Xuan T. Ho
Secretary
Dated: May 16, 2000
<PAGE>
AVIATION GENERAL, INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 16, 2000
The undersigned, having received the Annual Report to the Stockholders
and the accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement dated May 16, 2000 hereby appoints Wirt D. Walker, III, Xuan T. Ho and
each of them, proxies with full power of authorization, and hereby authorizes
them to represent and vote the shares of Common Stock of AVIATION GENERAL,
INCORPORATED (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held on June 16, 2000 at 2:00 p.m. local time, and any adjournment thereof, and
especially to vote
1. PROPOSAL ONE -- ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below _ to vote for all nominees
listed below _
Wirt D. Walker, III, Mishal Yousef Saud Al Sabah,
N. Gene Criss, Stephen R. Buren
To withhold authority to vote for any individual nominee, write that
nominee's name on the space provided below.
------------------------------------------------------------------------
2. PROPOSAL TWO -- To consider and vote upon the proposal to amend the Company's
1993 Stock Option Plan.
_ FOR _ AGAINST _ ABSTAIN
3. IN THEIR DISCRETION the proxies are authorized to vote upon such other
business as may properly come before the meeting.
ON REVERSE SIDE
In the ballot provided for that purpose, if you specify a choice as the
action to be taken this proxy will be voted in accordance with such choice. If
you do not specify a choice, it will be voted FOR Proposal One and Two as
described in the Proxy Statement.
Any proxy or proxies previously given for the meeting are revoked.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
Dated:__________________________________, 2000
---------------------------------------------
(Signature)
---------------------------------------------
(Signature if held jointly)
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian please give full title of each. If a corporation, please
sign in full corporate name by president or other authorized office. If a
partnership, please sign in partnership name by authorized person.
