SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by 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 Materials Pursuant to ss. 240.14a-11(c)
or ss.240.14a-12
AVIATION GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
AVIATION GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
4) Proposed maximum aggregate value of transaction:
(1) Set forth amount on which the filing is calculated and state how it was
determined.
[ ] 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 off-
setting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
November 5, 1999
To the Shareholders:
I am pleased to invite you to attend the Annual Meeting of Shareholders of
Aviation Group, Inc. to be held on Tuesday, December 7, 1999, commencing at
10:00 a.m. at the offices of the Company located at 700 North Pearl Street,
Suite 2170, Dallas, Texas 75201. The meeting this year will focus on the
election of two directors.
Aviation Group management is working hard to maximize value for all shareholders
and to communicate its progress with you. We hope that, whether or not you plan
to attend the Annual Meeting, you will complete, sign and return the enclosed
Proxy as soon as possible in the envelope provided. Your vote is important to
us. Returning the signed proxy card will ensure your representation at the
Annual Meeting if you do not attend in person.
Sincerely,
/s/ Lee Sanders
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Lee Sanders
Chairman and Chief Executive Officer
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 7, 1999
To the Shareholders of
Aviation Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Aviation Group, Inc., a Texas corporation (the "Company"), will be held on
Tuesday, December 7, 1999, beginning at 10:00 a.m., Dallas time, at the offices
of the Company, 700 North Pearl Street, Suite 2170, Dallas, Texas 75201, for the
following purposes:
1. To elect two directors to serve until the Annual Meeting of
Shareholders to be held in the year 2002;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors of the Company has fixed Friday, November 5,
1999, as the record date for determining the shareholders entitled to notice of,
and to vote at, this meeting or any adjournment thereof. The list of
shareholders entitled to vote will be available for inspection by any
shareholder at the offices of the Company, 700 North Pearl Street, Suite 2170,
Dallas, Texas, for ten days prior to the meeting.
You are cordially invited to attend this meeting in person, if
possible. If you do not expect to be present in person, please sign and date the
enclosed proxy and return it in the enclosed envelope, which requires no postage
if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lee Sanders
------------------------------------
Lee Sanders
Chairman and Chief Executive Officer
Dallas, Texas
November 5, 1999
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<PAGE>
AVIATION GROUP, INC.
700 North Pearl Street, Suite 2170
Dallas, Texas 75201
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 7, 1999
This Proxy Statement is furnished to shareholders of Aviation Group,
Inc., a Texas corporation (the "Company"), in connection with the solicitation
by order of the Board of Directors of the Company of proxies to be voted at the
Annual Meeting of Shareholders of the Company to be held on Tuesday, December 7,
1999, and is first being mailed with proxies to such shareholders on or about
November 8, 1999. Proxies in the form enclosed, properly executed by
shareholders and returned to the Company, which are not revoked, will be voted
at the meeting. A proxy may be revoked at any time before it is voted by written
notice thereof to the Secretary of the Company or by execution of a subsequent
proxy.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to notice of and to vote at
the Annual Meeting of Shareholders was the close of business on November 5,
1999. At the close of business on that date, the Company had issued, outstanding
and entitled to vote at the meeting 3,573,929 shares of Common Stock, $.01 par
value per share (the "Common Stock").
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder specifies otherwise
therein, will be voted:
(i) FOR the election of the nominees named herein for the office of
director; and
(ii) In the discretion of the proxy holders on any other matters that
may properly come before the meeting or any adjournment thereof.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding Common Stock is necessary to constitute a quorum at the meeting.
In deciding all questions, a holder of Common Stock shall be entitled to one
vote, in person or by proxy, for each share of Common Stock in the shareholder's
name on the record date. Shareholders have no cumulative voting rights.
In order to be elected as a director, the nominee must receive a
plurality of the votes cast at the meeting for the election of the director.
Since the two nominees receiving the largest number of affirmative votes will be
elected,
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<PAGE>
shares represented by proxies that are marked "abstain" will have no effect on
the outcome of the election. Under Texas law, proxies relating to "street name"
shares that are not voted by brokers on one or more matters will be treated as
shares present for purposes of determining the presence of a quorum but will not
be treated as shares entitled to vote as to such matter or matters not voted
upon.
As of the date hereof, the Board of Directors knows of no other
business that will be presented for action by the shareholders at this meeting.
However, if other proper matters are brought before the meeting, a vote may be
cast pursuant to the accompanying proxy in accordance with the judgment of the
proxy holders.
Should any nominee named herein for the office of director become
unwilling or unable to accept nomination or election, the proxy holders will
vote for the election in his place of such other person, if any, as management
may recommend; however, management has no reason to believe that any of the
nominees will be unwilling or unable to serve if elected. Each nominee has
expressed to management his intention, if elected, to serve the entire term for
which his election is sought.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board is not aware of any matters to come before the meeting other
than those specified in the attached Notice of the meeting. If any other matter
should come before the meeting, the persons named in the enclosed form of proxy
will have discretionary authority to vote all proxies with respect thereto in
accordance with their judgment.
VOTE OF PROXIES
All shares represented by duly executed proxies will be voted for or
against, or not voted, as specified on each proxy with respect to the election
of the nominees named herein as directors unless authority to vote for any
nominee has been withheld. If no choice is indicated, a proxy will be voted FOR
the election of the nominees named herein as directors. If for any unforeseen
reason such nominee should not be available as a candidate for director, the
proxies will be voted in accordance with the authority conferred in the proxy
for such other candidate as may be nominated by the Board of Directors.
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<PAGE>
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth certain information, as of October 15,
1999, with respect to the beneficial ownership of shares of the Common Stock (i)
by any person or "group," as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), known to the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) by each director of the Company and each executive officer of the
Company named in the Summary Compensation Table and (iii) by all directors and
executive officers of the Company as a group. Except as otherwise indicated,
each of the persons named below is believed by the Company to possess sole
voting and investment power with respect to the shares of Common Stock
beneficially owned by such person.
<TABLE>
<CAPTION>
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned (1) Percent of Total (2)
------------------- ---------------------- --------------------
<S> <C> <C> <C>
Lee Sanders 1,220,000 (3) 32.2%
700 North Pearl Street
Suite 2170
Dallas, Texas 75201
Richard Morgan 215,000 (4) 5.7%
Hank Clements 2,950 (5) *
Charles E. Weed 132,563 (6) 3.7%
Gordon Whitener 15,000 (7) *
All executive officers and
directors as a group (7 persons) 1,635,515 40.5%
<FN>
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* Less than 1%
(1) This information has been furnished by the Company's transfer agent and the
respective officers and directors. A person is deemed to be the beneficial
owner of securities that can be acquired within 60 days from the date set
forth above through the exercise of any option, warrant or convertible or
exchangeable note.
(2) In calculating percentage ownership, all shares of Common Stock that the
named shareholder has the right to acquire upon exercise of any option,
warrant or convertible or exchangeable note are deemed to be outstanding
for the purpose of computing the percentage of Common Stock owned by the
shareholder, but are not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other shareholders. Percentages
of shares beneficially owned are based upon 3,573,929 shares.
(3) Represents shares owned (i) 1,000,000 shares owned of record by The Sanders
Companies, Inc., a corporation wholly owned by Mr. Sanders, (ii) warrants
to purchase 200,000 shares at $1.6875 per share expiring 2003 and (iii)
options to purchase 50,000 shares at $1.8563 per share expiring 2004, of
which 40% had vested and were exercisable.
(4) Includes (i) 80,000 shares purchasable at $1.6875 per share pursuant to a
warrant expiring March 31, 2003, (ii) 15,000 shares purchasable, at $1.6875
per share, under non-statutory options expiring in 2004, and (iii) 100,000
shares purchasable, at $1.6875 per share, under warrants expiring 2003.
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<PAGE>
(5) Includes 2,500 shares purchasable, at $1.6875 per share, under warrants
expiring in 2002.
(6) Includes (i) 11,292 shares issuable, at $4.50 per share, upon the
conversion of convertible notes in the total principal amount of $50,814,
(ii) 3,750 shares issuable, at $3.00 per share, upon the conversion of a
convertible note in the principal amount of $11,250, (iii) 15,000 shares
purchasable, at $1.6875 per share, under warrants expiring in 2004, and
(iv) 5,000 shares purchasable, at $1.6875 per share, under warrants
expiring in 2003.
(7) Represents shares purchasable, at $1.6875 per share, under warrants
expiring in 2003 and 2004.
</FN>
</TABLE>
ELECTION OF DIRECTORS
GENERAL
Two directors are to be elected at the meeting to hold office until the
Annual Meeting of Shareholders to be held in the year 2002. The Board of
Directors' nominees for the office of director are Lee Sanders and Richard
Morgan. The nominees are currently directors of the Company.
The Board of Directors is classified into three classes of directors
pursuant to which the directors serve for staggered three-year terms. The terms
of office of Messrs. Morgan, Weed, Whitener, Sanders, and Clements as directors
expire at the annual meetings of shareholders to be held in 1999, 2000, 2001,
1999 and 2000, respectively.
The Board of Directors of the Company held six meetings during the
fiscal year ended June 30, 1999. During such fiscal year, all of the directors
attended 60% or more of the meetings of the Board of Directors and the
Committees on which they served.
DIRECTORS AND EXECUTIVE OFFICERS
The names, current ages and positions of the executive officers and
directors of the Company are as follows:
Name Age Position
Lee Sanders (1) 39 Chairman, President, Chief Executive
Officer and Director
Richard Morgan (1) 42 Executive Vice President, Chief
Financial Officer and Director
Paul Lubomirski 46 President of Aviation Exteriors
Louisiana, Inc., a subsidiary of the
Company
John Arcari 59 Vice President-Marketing and Develop-
ment
Charles E. Weed (2) 68 Director
Gordon Whitener (3) 36 Director
Hank Clements (2)(3) 42 Director
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(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
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<PAGE>
BUSINESS HISTORIES OF DIRECTORS AND EXECUTIVE OFFICERS
Lee Sanders has served as the founder, Chief Executive Officer, and
principal owner of the Company and its predecessors for more than five years. As
a result of his service for the Company and its predecessors, Mr. Sanders has
experience in managing businesses that provide aircraft painting, aircraft
interior modification and airline ground handling services. He also has a
marketing background from his experiences in starting and operating private
businesses. Mr. Sanders is responsible for overseeing the Company's marketing
efforts, customer relations, production, finance, acquisitions and overall
planning and operations. Mr. Sanders is a graduate of the University of
Tennessee, with a Bachelor of Science in Business Administration.
Charles E. Weed was elected a director of the Company in December 1996
and served as the President of Sunbelt Business Capital Incorporated ("Sunbelt")
from August 1992 to February 1996. Mr. Weed is engaged in the business of making
private investments individually and also serves as a consultant to the Company.
Gordon Whitener was elected a director of the Company in December 1996
and has been President and Chief Executive Officer of Interface Americas of
LaGrange, Georgia, a subsidiary of Interface Inc. and one of America's largest
manufacturer's of commercial carpet since 1994. He is additionally a member of
Interface Inc.'s board of directors. From 1992 to 1994, Mr. Whitener held
various senior marketing and sales positions in the commercial carpet
manufacturing industry with companies including Interface and Collins & Aikman.
Mr. Whitener is a graduate of the University of Tennessee.
Hank Clements was appointed a director of the Company on August 19,
1999. Mr. Clements is a resident of Dallas, Texas and since 1989 has been
President of The Clements Group, Inc., a Texas-based government relations and
political consulting firm. Mr. Clements is a graduate of Texas Tech University.
Richard Morgan was appointed as a director of the Company on February
26, 1997, and as the Company's Chief Financial Officer and Executive Vice
President in April 1998. He served as a consultant to the Company prior to April
1998. Mr. Morgan was formerly Chief Financial Officer of Search Capital Group,
Inc. ("Search") from August 1985 through December 1994, when he voluntarily
resigned. After Mr. Morgan's departure, eight Search subsidiaries conducting
business in the sub-prime, used-automobile finance business filed for protection
under Chapter 11 of the Federal Bankruptcy Code in August 1995. Mr. Morgan holds
a graduate degree in business from Vanderbilt University.
Paul Lubomirski was appointed as President of Pride Aviation, Inc., a
subsidiary of the Company, in March 1996 and has over 20 years of experience
with industrial and marine paint applications and has extensive knowledge of
paint systems and electrostatic application equipment. He has served as an
officer and employee of Pride since its incorporation in 1990. Mr. Lubomirski
also has a solid administrative background from years of experience in operating
private businesses and organizing and conducting many training seminars. Mr.
Lubomirski attended the University of Hawaii where he majored in mechanical
engineering. He directs the stripping and painting operations of the Company. He
has primary responsibility for the Company's facilities and training programs
applicable to the strip and paint operations.
John Arcari was appointed as a Vice President of the Company in April
1997. From 1958 to 1987, he served in numerous line and management positions
with Pan American World Airways. From 1987 to 1990, he was vice president of
maintenance and engineering for Tower Air, a New York-based airline. From 1990
to 1993, he was president of Page Avjet, an aircraft heavy maintenance and
overhaul outsourcing company. From 1994 until his employment with the Company,
he was an independent consultant to aviation maintenance and service outsourcing
companies.
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<PAGE>
No family relationships exist among the directors or executive officers
of the Company. Except as indicated above, none of the directors serve as
members of the Board of Directors of another company which is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
BOARD COMMITTEES
The Compensation Committee consists solely of Messrs. Whitener and
Clements. The Compensation Committee recommends compensation for officers other
than the President, administers incentive compensation and benefit plans,
including the Company's 1997 Stock Option Plan, and recommends policies relating
to such plans. The Compensation Committee held one meeting during the 1999
fiscal year.
The Audit Committee currently consists of Messrs. Weed and Clements.
The Audit Committee meets periodically with management and the Company's
independent auditors and reviews the results and scope of audits and other
services provided by the Company's independent auditors, the Company's
accounting procedures, and the adequacy of the Company's internal controls. The
Audit Committee held one meeting during the 1999 fiscal year.
In August 1998, the Board of Directors established an Executive
Committee. Messrs. Sanders and Morgan presently constitute the Executive
Committee and are empowered to exercise the powers of the Board in the
management of the business and affairs of the Company, except when the Board is
in session and except for certain powers which may be exercised only by the
Board.
DIRECTOR COMPENSATION
Directors are reimbursed for certain expenses in connection with
attendance at board and committee meetings. Non-employee directors have also
been granted warrants for their services as directors. As a result of these
grants, Mr. Whitener, Mr. Clements and Mr. Weed own warrants to purchase 15,000
shares, 2,500 shares and 20,000 shares, respectively, of Common Stock,
exercisable at $1.6875 per share, which expire in 2003 and 2004.
EXECUTIVE COMPENSATION
The following table sets forth information, for the fiscal years ended
June 30, 1999, 1998, and 1997, regarding the compensation of the Company's Chief
Executive Officer and one other executive officer who received compensation of
more than $100,000 for the fiscal year ended June 30, 1999 (the "Named Executive
Officers"). No other executive officers had compensation exceeding $100,000 for
the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
------------
Annual Compensation Compensation
------------------- ------------
Other Annual Securities
Fiscal ------------ Underlying
Name and Principal Position Year Salary Bonus Compensation Options
- ------------------------------------ ------------ ------------- ------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Lee Sanders, President and 1999 $144,000 $ 13,000 (1)
Chief Executive Officer 1998 $144,000 75,000 $ 13,000 (1) 250,000 (2)
<PAGE>
Richard L. Morgan 1999 120,000 12,000 (1)
Executive Vice President and 1998 30,000 -- 117,000 (3) 115,000 (4)
Chief Financial Officer
<FN>
- --------------------
(1) Represents aggregate annual lease payments and insurance costs for an
automobile.
(2) Represents (i) options to purchase 50,000 shares exercisable at $1.875 per
share, and (ii) warrants to purchase 200,000 shares of Common Stock at
$1.6875 per share expiring in 2003.
(3) Represents consulting fees earned prior to appointment as an executive
officer of the Company.
(4) Represents (i) warrants to purchase 100,000 shares of Common Stock at
$1.6875 per share expiring in 2003 and (ii) warrants to purchase 15,000
shares of Common Stock at $1.6875.
</FN>
</TABLE>
STOCK OPTIONS AND WARRANTS
During the fiscal year ended June 30, 1999, the Board of Directors
granted no options or warrants to Named Executive Officers. None of the options
or warrants that have been granted to the Named Executive Officers were
exercised during the fiscal year ended June 30, 1998. Following the end of the
fiscal year, in August 1999, the Board of Directors determined to amend the
outstanding options and warrants for the Company's employees and directors,
including the Named Executive Officers, by reducing the exercise price to
$1.6875 per share, which was the then current market price for the Common Stock.
In August 1999, the Board also extended the expiration date of warrants to
purchase 80,000 shares previously issued to Mr. Morgan from March 31, 1999 to
March 31, 2003.
<TABLE>
<CAPTION>
FISCAL YEAR END OPTION/WARRANT VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/Warrants Options/Warrants
Name at June 30, 1999 at June 30, 1999
- ---- ---------------------- ---------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lee Sanders 200,000 0 $ 0 0
20,000 30,000 0 0
Richard Morgan 80,000 0 0 0
100,000 0 0 0
15,000 0 0 0
</TABLE>
<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company engages Charles Weed as a consultant pursuant to a
consulting agreement between Mr. Weed and the Company which expires in February
2000. The Company pays Mr. Weed a fee of $4,000 per month.
The Company has an employment agreement with each of Paul Lubomirski
and John Arcari. The employment agreements of Mr. Lubomirski and Mr. Arcari
expire in 2000. Mr. Lubomirski and Mr. Arcari are paid annual salaries of
$90,000 and $80,000, respectively. Each employment agreement contains a
non-competition agreement for a period of three years after any expiration or
termination of the agreement. Each employee is entitled to additional benefits,
including disability insurance, life insurance, and health and dental insurance.
Mr. Arcari is eligible for additional bonuses as may be determined by the Board
of Directors. Mr. Lubomirski's employment agreement specifies a formula for
bonus payments that varies between 10% and 70% of his annual salary if the net
profit for the Company's painting subsidiary Aviation Exterior Louisiana, Inc.
for any fiscal year exceeds certain amounts during the term of his agreement.
The Company entered into an employment agreement with Lee Sanders in
March 1996. In April and August 1997 and August 1998, the employment agreement
was amended. The amended employment agreement requires the Company to pay Mr.
Sanders an annual salary of $144,000 with increases at the end of each calendar
year based on the Consumer Price Index. Mr. Sanders is eligible for a bonus to
be determined in the sole discretion of the Board based on merit, the Company's
financial performance and other relevant criteria. The employment agreement
expires on August 13, 2000 but automatically extends for an additional year on
August 13 of each year unless either party affirmatively elects not to extend
the term. The employment agreement contains a non-competition agreement for
three years after any expiration or termination of the agreement. Mr. Sanders is
entitled to additional benefits, including disability insurance, life insurance,
and health and dental insurance. If the Company terminates Mr. Sanders'
employment at any time or if Mr. Sanders terminates his employment within one
year after a change in ownership or control of the Company, the Company is
required to pay him severance pay equal to the unpaid salary for the remainder
of the term of the agreement plus the total salary and bonus compensation paid
to him during the year period preceding the termination. A change in ownership
or control of the Company includes appointment of any person other than Mr.
Sanders as Chairman or Chief Executive Officer or the removal of him from either
of such positions, any change in a majority of the Board members not approved by
him, any transfer or issuance of shares representing more than 25% of the
beneficial ownership of the Company if not approved in advance by Mr. Sanders,
any material change in his authority or duties and any breach by the Company of
the employment agreement not remedied within ten days after notice from him.
1997 STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "1997 Option Plan") was
adopted by the Board of Directors and the Company's shareholders in February
1997. The purpose of the 1997 Option Plan is to provide increased incentives to
key employees and directors of the Company to render services and exert maximum
effort for the business success of the Company. Pursuant to the 1997 Option
Plan, the Company may grant incentive and nonstatutory (nonqualified) stock
options to key employees and directors of the Company. A total of 150,000 shares
of Common Stock have been reserved for issuance under the 1997 Option Plan.
The Board or the Compensation Committee has the authority to select the
key employees and directors of the Company to whom stock options are granted
(provided that incentive stock options only be granted to employees of the
Company). Subject to the limitations set forth in the 1997 Option Plan, the
Board or the Compensation Committee has the authority to designate the number of
shares to be covered by each option, determine whether an option is to be an
incentive stock option or a nonstatutory option, establish vesting schedules,
specify the type of consideration to be paid to the Company upon exercise and,
subject to certain restrictions, specify other terms of the options.
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The maximum term of options granted under the 1997 Option Plan is ten
years. The aggregate fair market value of the stock with respect to which
incentive stock options are first exercisable in any calendar year may not
exceed $100,000 per incidence. Options granted under the 1997 Option Plan are
nontransferable and generally expire within three months after the termination
of an optionee's service to the Company. In general, if an optionee is disabled,
dies or retires from his or her service to the Company, such option may be
exercised up to three months following such disability or death unless the board
or Compensation committee determine to allow a longer period for exercise.
The exercise price of incentive stock options must not be less than the
fair market value of the Common Stock on the date of grant. The exercise price
of incentive stock options granted to any person who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock must be at least 110% of the fair market value of such stock on the
date of grant, and the term of those options cannot exceed five years.
As of September 30, 1999, the Company had outstanding incentive stock
options to purchase, at an exercise price of $1.6875 per share, an aggregate of
35,000 shares of Common Stock. In addition, Mr. Sanders has been granted an
incentive stock option to purchase 50,000 shares of Common Stock at $1.8563 per
share. These options expire in 2004 and 2005.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective March 1, 1996, in connection with the Company's acquisition
of Pride Aviation, Inc. ("Pride"), the Company entered into a consulting
agreement with Charles Weed, a director of the Company. This agreement expired
in February 1998, at which time a new consulting agreement was reached with Mr.
Weed. Under the new agreement, the Company is obligated to pay Mr. Weed a
consulting fee of $4,000 per month until February 2000. As one of the selling
owners of Pride, Mr. Weed was issued a 10% Convertible Note in the principal
amount of $52,000 in connection with the Company's acquisition of Pride. He
subsequently purchased an additional $70,000 of the Company's 10% Convertible
Notes from another holder. Effective March 1, 1996, the Company also issued to
Mr. Weed a convertible note in the principal amount of $27,000 in exchange for
unpaid consulting fees owed to him by Pride. This note has terms similar to the
Company's 10% Convertible Notes except that it is convertible at $3.00 (in lieu
of $4.50) per share. As of June 30, 1999, Mr. Weed held convertible notes
totaling $62,064 in principal amount. To induce the conversion by holders of the
10% Convertible Notes of the payments due on March 31, June 30 and September 30,
1999, the Company agreed to reduce the conversion price for these Notes to $1.75
per share. In May 1999, six holders of the Notes agreed to convert these
payments totaling $221,000 for a total of 126,427 shares of Common Stock,
including the conversion by Mr. Weed of $37,250 in principal amount of his
Notes, plus accrued interest, for 24,954 shares of Common Stock.
Mr. Weed was a member and manager of Sunbelt Business Capital, L.L.C.
("Sunbelt L.L.C."). In connection with the Pride acquisition, the Company issued
56,000 shares to certain of the former owners of Pride (including 8,354 shares
to Mr. Weed) in exchange for the cancellation of $168,000 of debt. The remainder
of this debt was contributed by these owners to Sunbelt L.L.C. Pride delivered a
new promissory note dated March 1, 1996 to evidence this debt in the approximate
amount of $155,000 to Sunbelt L.L.C. The note required payments of 27 equal
monthly installments of $6,400. On May 13, 1997, when the outstanding principal
balance of the note was $83,000, Sunbelt L.L.C. sold the note to Jerry R. Webb
who at the same time loaned an additional $200,000 to Pride. The entire $283,000
debt to Mr. Webb was restructured and was evidenced by a new note payable in
full in May, 1998, bearing interest at 18% per annum. The note required monthly
payments of interest only. Mr. Weed owned a participation interest of $83,000 in
the debt owed to Mr. Webb by Pride. On July 9, 1997, Jerry Webb advanced an
additional $144,000 against certain receivables, for which the Company promised
to pay Mr. Webb $150,000 on or before August 1, 1997. The maturity date was
subsequently extended and this note, together with the existing note of
$283,000, was repaid in late August 1997. The notes restricted the prepayment of
principal; however, Mr. Webb
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<PAGE>
allowed the prepayment in exchange for the issuance of 3,000 shares of Common
Stock, of which he transferred 1,000 shares to Mr. Weed attributable to Mr.
Weed's loan participation interest. In June 1999, Mr. Webb and another
shareholder of the Company loaned the Company $600,000 in a note due December
31, 1999. As compensation for arranging this financing on behalf of the Company,
Mr. Weed received 40,000 shares of the Company's Common Stock.
In August 1998, under their prior acquisition agreements with the
Company, two former shareholders of the Company, who own an aggregate of 82,165
shares of Common Stock, claimed that they were entitled to receive certain
payments from the Company upon a resale of their shares. Charles E. Weed
purchased 20,000, and three other existing Company shareholders purchased the
remainder, of the shares of these two shareholders at a price of $3.00 per
share, which was in the range of closing trading prices at the time of the sale
in late August 1998. To facilitate the transaction, the Company agreed with each
of the shareholders, including Mr. Weed, that the purchasers would receive at
least $3.50 per share in sales proceeds upon any resale of these shares after
one year. Mr. Weed and each shareholder agreed not to resell these shares for
one year. As a result of this arrangement, the Company owed Mr.
Weed $10,000 which it is repaying at a rate of $3,000 per month.
The Board of Directors of the Company believes that all transactions
between the Company and any of its affiliates have been made on terms no less
favorable to the Company than would have been obtained from non-affiliated third
parties. Any future transactions between the Company and any of its affiliates
will be subject to approval by a majority of the independent disinterested
members of the Board of Directors or by a majority of the shareholders of the
Company, other than any interested shareholders, and will be made on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties. The Company will not make any loans to its officers, directors, 5%
shareholders or affiliates, except for bona fide business purposes.
INDEPENDENT AUDITORS
The firm of Hein + Associates, LLP has served as the independent
auditors of the Company for the fiscal year ended June 30, 1999. A
representative of such firm is expected to be present at the meeting and will be
available to answer questions and will be afforded an opportunity to make a
statement if desired.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the next annual meeting of
shareholders of the Company scheduled to be held in November 1999 must be
submitted in accordance with the rules of the Securities and Exchange Commission
and received by the Secretary of the Company at the mailing address set forth on
the first page of this statement no later than the close of business on July 7,
2000. Any proposals from shareholders to be presented for consideration without
inclusion in the proxy material in connection with the 2000 annual meeting of
shareholders of the Company must be submitted in accordance with the rules of
the Securities and Exchange Commission and received by the Secretary of the
Company at the mailing address set forth on the first page of this statement no
later than the close of business on September 20, 2000. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to the 2000 Annual Meeting any shareholder proposal
that does not meet all of the requirements for inclusion established by the
Securities and Exchange Commission in effect at the time such proposal is
received.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Directors, officers and greater than 10%
beneficial owners are required by applicable regulations to furnish the Company
with copies of all forms they file with the Commission pursuant to Section
16(a).
Based solely on a review of the Form 3, 4 and 5 reports filed with the
Commission, the Company believes that all reports of ownership and changes in
ownership with respect to the fiscal year ended June 30, 1999 have been timely
filed with the Commission as required by Section 16(a) of the Exchange Act,
except as follows:
Charles Weed failed to file with the Commission on a timely basis one
report relating to conversion of a portion of his Convertible Notes into shares
of Common Stock.
OTHER MATTERS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
form of proxy and the material used in the solicitation thereof will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors, officers and employees
of the Company. Arrangements have also been made with brokerage houses, banks
and other custodians, nominees and fiduciaries for the forwarding of soliciting
materials to the beneficial owners of Common Stock held of record by such
persons, and the Company will reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith.
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than 5% of the Company's
Common Stock is based upon information contained in reports filed by such owner
with the Securities and Exchange Commission.
By Order of the Board of Directors,
/s/ Lee Sanders
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Lee Sanders,
Chairman and Chief Executive Officer
Dallas, Texas
November 5, 1999
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<PAGE>
PROXY
AVIATION GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lee Sanders and Richard L. Morgan, and
each of them severally, as their proxies with full power of substitution and
resubstitution for and in the name, place and stead of the undersigned to vote
upon and act with respect to all of the shares of Common Stock of Aviation
Group, Inc. (the "Company") standing in the name of the undersigned, or with
respect to which the undersigned is entitled to vote and act, at the Annual
Meeting to be held on Tuesday, December 7, 1999, or any adjournment(s) thereof.
The undersigned acknowledges receipt of the Notice of the Annual Meeting and
Proxy Statement dated November 5, 1998.
Item 1. Election of each of the following nominees to the Board of
Directors of the Company: Lee Sanders, Richard Morgan
[ ] FOR [ ] WITHHOLD
The undersigned may withhold authority to vote for either nominee by lining
through or otherwise striking out the name of such nominee.
Item 2. Other matters that may properly come before the meeting:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(a vote "FOR" indicated above signifies the authority to cast your votes in
accordance with the judgment of the proxy holders.)
PLEASE MARK YOUR VOTES IN THE CORRESPONDING BOXES ABOVE
(CONTINUED ON REVERSE SIDE)
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<PAGE>
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE LISTED NOMINEES FOR DIRECTOR, AND FOR PROPOSALS
2 AND 3. If more than one of the proxies named shall be present in person or by
substitution at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
DATE:
-------------------------
--------------------------------
Signature
--------------------------------
Signature
Please date this proxy and sign
your name exactly as it appears
hereon. When there is more then
one owner, each should sign.
When signing as an attorney, ad-
ministrator, executor, guardian
or trustee, please add your
title as such. If executed by
a corporation, the proxy should
be signed by a duly authorized
officer.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
