<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 sec. 240.14a-11(c) or sec. 240.14a-12
AVIALL, INC.
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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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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 Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
Aviall, Inc.
Notice of 1997 Annual Meeting
and Proxy Statement
<PAGE> 3
LOGO
ERIC E. ANDERSON
President and
Chief Executive Officer
April 25, 1997
Dear Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders to be
held at 10:00 a.m. on Friday, June 13, 1997, at the Company's offices located at
2075 Diplomat Drive in Dallas, Texas. All stockholders of record as of April 16,
1997 are entitled to vote at the Annual Meeting.
The proposals to be acted upon at the Annual Meeting include the election of
directors, an amendment to the Aviall, Inc. Directors Stock Plan to, among other
things, permit non-employee directors to receive shares of the Company's Common
Stock in lieu of the full amount of the cash annual retainer such directors are
otherwise entitled to receive for their services and to increase the number of
shares available for issuance under the Plan, and the ratification of the
appointment of independent auditors for 1997. I hope you will carefully read
these proposals, which are described in the accompanying Proxy Statement, and
cast your vote in favor of each proposal.
It is important that your shares be represented at the Annual Meeting.
Accordingly, even if you plan to attend, please sign, date and promptly mail the
enclosed proxy card in the postage-prepaid envelope.
Sincerely,
/s/ ERIC E. ANDERSON
Eric E. Anderson
President and Chief Executive Officer
Aviall, Inc., 2075 Diplomat Drive, Dallas, TX 75234-8999 U.S.A.
<PAGE> 4
PROXY STATEMENT
AVIALL, INC.
2075 DIPLOMAT DRIVE
DALLAS, TEXAS 75234-8989
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Aviall, Inc. ("Aviall" or the "Company") of proxies to
be voted at the Annual Meeting of Stockholders of Aviall (the "Annual Meeting")
to be held on Friday, June 13, 1997, commencing at 10:00 a.m., at the Company's
offices located at 2075 Diplomat Drive, in Dallas, Texas or at any adjournment
or postponement thereof. This Proxy Statement and the accompanying proxy card
are first being distributed on or about April 25, 1997, to holders of Aviall's
common stock, par value $.01 per share ("Common Stock"), entitled to vote at the
Annual Meeting.
A Proxy Committee consisting of Jacqueline K. Collier, Jeffrey J. Murphy
and Cornelius Van Den Handel will vote the shares of Common Stock represented by
each proxy card returned to Aviall. Any stockholder giving a proxy has the power
to revoke it at any time before it is exercised at the Annual Meeting by filing
with the Secretary of Aviall an instrument revoking it, by delivering a duly
executed proxy card bearing a later date or by appearing at the Annual Meeting
and voting in person. Where a stockholder's proxy specifies a choice with
respect to a matter, the shares will be voted accordingly. IF NO SUCH
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR
IDENTIFIED BELOW, FOR THE AMENDMENT OF THE DIRECTORS STOCK PLAN AND FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS AVIALL'S INDEPENDENT
AUDITORS.
PROCEDURES FOR THE ANNUAL MEETING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. Business at the Annual
Meeting will be conducted in accordance with the procedures determined by the
Chairman of the Annual Meeting and will be limited to matters properly brought
before the Annual Meeting pursuant to the procedures prescribed in Aviall's
By-Laws. Those procedures include the requirement that any stockholder who
desires either to bring a stockholder proposal before an annual meeting or to
nominate a person for election as a director at an annual meeting give written
notice to Aviall with respect to the proposal or nominee prior to the Annual
Meeting. The Chairman of the Annual Meeting may refuse to acknowledge any
stockholder proposal or any nomination for director not made in accordance with
the foregoing.
The Board does not anticipate that any matters other than those set forth
in this Proxy Statement will be brought before the Annual Meeting. If, however,
other matters are properly brought before the Annual Meeting, proxies will be
voted in accordance with the judgment of the Proxy Committee.
RECORD DATE AND VOTING STOCK
On April 16, 1997, which has been set as the record date for the purpose of
determining stockholders entitled to notice of, and to vote at, the Annual
Meeting (the "Record Date"), there were 19,599,451 shares of Common Stock
outstanding. All of the outstanding shares of Common Stock may be voted at the
Annual Meeting and each such share is entitled to one vote. Only recordholders
of Common Stock at the close of business on the Record Date are entitled to vote
at the Annual Meeting or any adjournment or postponement thereof.
A majority of the votes cast at the Annual Meeting is required to approve
the actions proposed to be taken at the Annual Meeting. Abstentions and broker
non-votes will be included in determining the number of shares of Common Stock
present or represented at the Annual Meeting or any adjournment or postponement
thereof for purposes of determining whether a quorum exists. However,
abstentions and broker non-votes with respect to any matter brought to a vote at
the Annual Meeting or any adjournment or postponement thereof will be treated as
shares not voted for purposes of determining whether the requisite vote has been
obtained and therefore will have no effect on the outcome of the vote on any
such matter.
<PAGE> 5
PARTICIPANTS IN 401(k) PLAN
If a stockholder is a participant in the Aviall, Inc. Employees' Savings
Plan (the "401(k) Plan") and holds shares of Aviall Common Stock in the 401(k)
Plan, the proxy card represents the number of full shares of Common Stock held
for the benefit of the participant in the 401(k) Plan as well as any shares of
Common Stock registered in the participant's name. Thus, a proxy card for such a
participant grants a proxy for shares registered in the participant's name and
serves as a voting instruction for the trustees of the 401(k) Plan for the
account in the participant's name. Information as to the voting instructions
given by individuals who are participants in the 401(k) Plan will not be
disclosed to Aviall.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Aviall has three classes of directors serving staggered three-year terms.
Henry A. McKinnell and Eric E. Anderson are currently serving terms which expire
at the Annual Meeting. The terms of office of Robert G. Lambert and Donald R.
Muzyka expire at Aviall's 1998 Annual Meeting of Stockholders and the term of
office of Henry Wendt expires at Aviall's 1999 Annual Meeting of Stockholders.
Accordingly, stockholders are asked to elect Henry A. McKinnell and Eric E.
Anderson, each of whom has been duly nominated by the Board, to serve a term of
office expiring at Aviall's 2000 Annual Meeting of Stockholders.
Unless a proxy card specifies otherwise, the Proxy Committee will vote the
shares of Common Stock covered by the proxy for the election of each of Henry A.
McKinnell and Eric E. Anderson to the class of directors whose term expires at
Aviall's 2000 Annual Meeting of Stockholders. In the event either of these
nominees becomes unavailable to serve (which is not anticipated), the proxy card
gives the Proxy Committee the authority to vote for such other person as it may
select. A majority of the votes cast at the Annual Meeting is necessary for the
election of a nominee to the class of directors whose term expires at Aviall's
2000 Annual Meeting of Stockholders.
2
<PAGE> 6
The following material sets forth the name of each nominee and of each
director continuing in office, a description of positions and offices with
Aviall, any other principal occupation, business experience during at least the
last five years, certain directorships presently held, age and length of service
as a director of Aviall.
THE PERSONS NAMED IN THE PROXY WILL VOTE FOR THE NOMINEE LISTED BELOW
EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
NOMINEES FOR DIRECTOR
FOR A TERM OF OFFICE EXPIRING AT AVIALL'S 2000 ANNUAL MEETING OF STOCKHOLDERS
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<TABLE>
<S> <C> <C>
[PHOTO] ERIC E. ANDERSON Eric E. Anderson has served as Aviall's
President and Chief President since June 1996 and as Chief
Executive Officer Executive Officer since December 1996. He
of Aviall served as the Company's Chief Operating
Officer from June 1996 through December 1996
and as an Executive Vice President of the
Company from February 1996 until June 1996.
Mr. Anderson was President of Inventory
Locator Service, Inc. ("ILS"), a wholly
Director since 1996 owned subsidiary of the Company, from 1993
Age 48 to 1996, and was Executive Vice President of
ILS from 1991 to 1993.
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[PHOTO] DR. HENRY A. MCKINNELL Dr. McKinnell has served as Executive Vice
Executive Vice President President of Pfizer Inc. since 1992. He was
of Pfizer Inc. appointed President of Pfizer's Worldwide
Member -- Audit Committee Pharmaceuticals business in January 1997.
Chairman -- Compensation and Pfizer's Worldwide Consumer Group and
Nominating Strategic Planning and Policy Group continue
Committee to report to him. From 1992 to 1995 he
served as Chief Financial Officer of Pfizer
Director since 1993 Inc. and President of Pfizer's Hospital
Age 54 Products Group. Dr. McKinnell is also a
director of John Wiley & Sons, Inc.
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</TABLE>
3
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE AT AVIALL'S 1998 ANNUAL MEETING OF STOCKHOLDERS
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<TABLE>
<S> <C> <C>
[PHOTO] ROBERT G. LAMBERT Mr. Lambert has served as Chairman of the
Chairman of the Board Board of Directors of Aviall since December
of Aviall 1993. He served as the Company's President
Member -- Audit Committee from December 1995 to June 1996 and as Chief
Executive Officer from December 1995 to
December 1996. Mr. Lambert was Senior
Executive Vice President -- Aviation of
Director since 1993 Ryder System, Inc. from 1989 until 1992. Mr.
Age 66 Lambert is also a director of Petroleum
Helicopters, Inc.
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[PHOTO] DR. DONALD R. MUZYKA Dr. Muzyka has served as President and Chief
President and Chief Executive Officer of Special Metals
Executive Officer of Corporation ("SMC") since October 1996. He
Special Metals Corporation served as President and Chief Operating
Member -- Audit Committee Officer of SMC from January 1990 to October
Director since 1994 Member -- Compensation and 1996. Dr. Muzyka is also a director of SMC
Age 58 Nominating and CSM Industries, Inc.
Committee
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</TABLE>
DIRECTOR WHOSE TERM EXPIRE AT AVIALL'S 1999 ANNUAL MEETING OF STOCKHOLDERS
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<TABLE>
<S> <C> <C>
- ------------------- HENRY WENDT Mr. Wendt has served as Chairman of Global
Chairman of Global Health Health Care Partners, a unit of Donaldson,
Care Lufkin & Jenrette, Inc., an investment
Partners, a unit of banking firm, since January 1997. Mr. Wendt
Donaldson, served as the Executive Chairman of The
Lufkin & Jenrette, Inc. Finisterre Fund from October 1994 until
Chairman -- Audit Committee December 1996. He served as Chairman of
Member -- Compensation and SmithKline Beecham from 1989 until his
Nominating retirement in 1994. Mr. Wendt is also a
Director since 1993 Committee director of Atlantic Richfield Co.,
Age 63 Allergan, Inc., Steri-Oss, Inc. and
Computerized Medical Systems, Inc.
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</TABLE>
4
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board currently consists of five members. During 1996, the Board of
Directors held 11 meetings. The Board has established standing Audit and
Compensation and Nominating Committees to assist the Board in the discharge of
its responsibilities. The Board may also appoint other committees for
specialized functions as appropriate. All of the Directors of Aviall are
independent directors (as that term is defined in Aviall's By-Laws) other than
Messrs. Anderson and Lambert. Aviall's By-Laws provide that a majority of the
Board and each member of the Compensation and Nominating Committee be an
independent director. Each Director attended at least 75% of the Board and
committee meetings held in 1996.
Audit Committee. The Audit Committee consists of Henry Wendt (Chairman),
Robert G. Lambert, Henry A. McKinnell and Donald R. Muzyka. The Audit Committee
met seven times in 1996. The Audit Committee is responsible for recommending an
accounting firm to serve as Aviall's independent auditors, reviewing the annual
audit of Aviall, reviewing audit and any nonaudit fees paid to Aviall's
independent auditors, reviewing the scope and results of internal audit
activities, and reviewing compliance with Aviall's conflict of interest and
business ethics policies as well as compliance with major regulatory
requirements. The Audit Committee reports its findings and recommendations to
the Board for appropriate action.
Compensation and Nominating Committee. The Compensation and Nominating
Committee (the "Compensation Committee") consists of Henry A. McKinnell
(Chairman), Donald R. Muzyka and Henry Wendt, none of whom are employees of
Aviall. During 1996, the Compensation Committee met seven times. The
Compensation Committee supervises Aviall's compensation policies, administers
employee incentive plans, reviews officers' salaries and bonuses, approves
significant changes in employee benefits and recommends to the Board such other
forms of remuneration as it deems appropriate. The Compensation Committee also
considers nominations for prospective Board members. The Compensation Committee
considers nominees recommended by other directors, stockholders and management
who present for evaluation by the Board appropriate information with respect to
a suggested candidate for Board membership. Written nominations by stockholders
for directors are considered, provided they are received by the Secretary of
Aviall at its principal executive offices pursuant to timely advance written
notice in accordance with Aviall's By-Laws (not less than 70 days nor more than
90 days prior to the first anniversary of the previous year's annual meeting,
subject to certain exceptions) and contain all information specified in such
By-Laws, including the identity and address of the nominating stockholder, the
class and number of shares of Common Stock which are owned by such stockholder
and all information regarding the proposed nominee that would be required to be
included in a proxy statement soliciting proxies for the proposed nominee.
Aviall's By-Laws also provide that all members of the Compensation Committee
shall be independent directors who are not otherwise affiliated with Aviall. The
report by the Compensation Committee discussing compensation for senior
executives of Aviall appears elsewhere in this Proxy Statement.
5
<PAGE> 9
COMPENSATION OF DIRECTORS
During 1996, directors who were not employees of Aviall received an annual
retainer of $16,250 (the "Annual Retainer"), plus an annual committee retainer
of $3,000 per committee ($4,000 for committee chairmen), plus $1,000 for each
Board or committee meeting attended. Directors and members of Board committees
who are employees of Aviall or any of its subsidiaries do not receive any fees
or benefits for their Board and committee service. Directors are reimbursed for
expenses incurred in attending Board and committee meetings.
Directors who are not employees of Aviall are presently eligible to
participate in the Aviall, Inc. Directors Stock Plan (the "Directors Stock
Plan"). Under the Directors Stock Plan, any eligible director may make an
election to receive a combination of shares of Common Stock determined by a
formula and $8,000 in cash (collectively, the "Formula") in lieu of the Annual
Retainer. The Formula provides that the number of shares of Common Stock granted
to a participant will be equal to the nearest number of whole shares of Common
Stock which can be purchased for $12,000 based on the mean of the highest and
lowest sale price for the Common Stock on the grant date as reported on the New
York Stock Exchange Composite Transaction Reporting System. In the event that
there is an increase or decrease in the Annual Retainer, the Formula adjusts
automatically so that both the relationship between the Formula and the Annual
Retainer and the proportion of Common Stock and cash paid to a participating
director pursuant to the Formula are maintained. Under the Directors Stock Plan,
Common Stock is granted automatically on the first business day in July of any
calendar year to any eligible director who has filed with Aviall an election to
participate in the Directors Stock Plan at least six months prior to that date.
All eligible directors participated in the Directors Stock Plan during 1996. In
1997, all eligible directors have elected to participate in the Directors Stock
Plan. See "Amendment to the Aviall, Inc. Directors Stock Plan."
A director who receives a grant of Common Stock pursuant to the Directors
Stock Plan is entitled to receive dividends on and to vote such shares. However,
the director's ownership rights in such shares do not vest until six months
after the date of grant and then only if the director continues to serve in that
capacity at that date. However, a participating director who has completed a
full term of service prior to the end of such six-month period, or whose service
during such six-month period was interrupted due to death or disability, will be
vested in a pro rata number of such shares.
Directors of Aviall are currently permitted to elect to defer receipt of
the cash portion of the Annual Retainer and meeting fees. Deferred funds become
part of the general assets of Aviall and bear simple interest at a rate based
upon the base or prime rate of a major bank, although not lower than 5% or
higher than 12% per annum. At the discretion of the director, the funds may be
deferred until the earlier to occur of a fixed date, retirement, disability or
removal, and will be payable in a lump sum or installments. However, upon a
change of control of Aviall, all deferred amounts are distributed immediately to
the director in a lump sum.
During 1996, Aviall also provided all non-employee directors with $100,000
of coverage under Aviall's accidental death and dismemberment insurance policy,
disability income protection, a group term life insurance policy, yearly
compensation at retirement equal to 100% of the cash Annual Retainer in effect
at the time of their retirement and the use of an automobile. Beginning in 1997,
the Board has discontinued these benefits.
As more fully described below under this caption "Amendment to the Aviall,
Inc. Directors Stock Plan," the Company's Board of Directors has approved an
amendment to the Directors Stock Plan to, among other things, permit nonemployee
Directors to receive shares of Common Stock in lieu of the full amount of the
Annual Retainer they are entitled to receive for their services as Directors.
The amendment to the Directors Stock Plan will become effective only upon
approval by the Company's stockholders. Subject to such approval, the annual
committee retainer of $3,000 per committee ($4,000 for committee chairman) will
be eliminated and the cash Annual Retainer will be increased to $24,375 for
those non-employee Directors who elect not to participate in the amended
Directors Stock Plan. If the proposed amendment to the Directors Stock Plan is
not approved by the Company's stockholders, the Annual Retainer will remain at
$16,250 for 1997, the annual committee retainer will be continued and the
Directors Stock Plan will remain in effect as described above. In either event,
non-employee Directors will continue to receive $1,000 for each Board or
committee meeting attended. In 1997, all eligible Directors have elected to
participate in the Directors Stock Plan.
6
<PAGE> 10
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of March 31, 1997, the directors of Aviall, the individuals who served
as Chief Executive Officer of Aviall in 1996, the other four most highly
compensated executive officers of Aviall at December 31, 1996, two other
individuals who served as executive officers of Aviall for a portion of 1996 and
all current directors and executive officers of Aviall as a group, beneficially
owned Common Stock as set forth in the following table. For purposes of this
Proxy Statement, Eric E. Anderson, Robert G. Lambert, Jacqueline K. Collier,
Charles M. Kienzle, Bruce Langsen, Jeffrey J. Murphy, Mina Brown and R. Frank
Leftwich are referred to as the "named executive officers."
<TABLE>
<CAPTION>
TOTAL SHARES
NAME OWNED SHARES(1) OPTION SHARES(2) BENEFICIALLY OWNED(3)
---- --------------- ---------------- ---------------------
<S> <C> <C> <C>
Eric E. Anderson........................ 6,888(4) 53,991 60,879
Robert G. Lambert....................... 3,378(5) 99,750 103,128
Henry A. McKinnell...................... 4,136 0 4,136
Donald R. Muzyka........................ 3,755 0 3,755
Henry Wendt............................. 67,136(6) 0 67,136
Jacqueline K. Collier................... 2,437 18,086 20,523
Charles M. Kienzle...................... 3,447 44,874 48,321
Bruce Langsen........................... 4,604 13,740 18,344
Jeffrey J. Murphy....................... 1,890(7) 114,451 116,341
Mina Brown.............................. 0 63,962 63,962
R. Frank Leftwich....................... 0(8) 69,133 69,133
All current directors and executive
officers as a group (11 persons)...... 106,188 351,148 457,336
</TABLE>
- ---------------
1. Represents shares of Common Stock owned by such individuals, including
shares owned pursuant to the 401(k) Plan and the Directors Stock Plan.
2. Represents shares that may be acquired within 60 days of March 31, 1997,
through the exercise of stock options.
3. Unless otherwise noted, the holders of the shares of Common Stock included
in this table have sole voting and investment power with respect to all such
shares. As of March 31, 1997, no director or other named executive officer
beneficially owned one percent or more of the outstanding Common Stock. All
current directors and executive officers as a group beneficially owned
approximately 2.3% of the outstanding Common Stock as of March 31, 1996.
4. Includes 3,000 shares of Common Stock held jointly by Mr. Anderson and his
spouse. Mr. Anderson has shared voting and investment power with respect to
such shares.
5. Includes 225 shares of Common Stock held in trust for the benefit of Mr.
Lambert's children. Mr. Lambert is a co-trustee of such trust and has shared
voting and investment power with respect to such shares. Mr. Lambert
disclaims beneficial ownership of the 225 shares held in trust.
6. Includes 10,000 shares of Common Stock held jointly by Mr. Wendt and his
spouse. Mr. Wendt has shared voting and investment power with respect to
such shares.
7. Includes 1,363 shares of Common Stock held jointly by Mr. Murphy and his
spouse. Mr. Murphy has shared voting and investment power with respect to
such shares.
8. Excludes 500 shares of Common Stock held by Mr. Leftwich's spouse. Mr.
Leftwich disclaims beneficial ownership of such shares.
7
<PAGE> 11
The following table sets forth information regarding the number and
percentage of shares of Common Stock held by all persons and entities who are
known by Aviall to beneficially own five percent or more of Aviall's outstanding
Common Stock. The information regarding beneficial ownership of Common Stock by
the entity identified below is included in reliance on a report filed with the
SEC by such entity, except that the percentage is based upon Aviall's
calculations made in reliance upon the number of shares reported to be
beneficially owned by such entity in such report and the number of shares of
Common Stock outstanding on March 31, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
<S> <C> <C>
Neuberger & Berman, LLC 1,992,200 10.2%(1)
605 Third Ave.
New York, New York 10158-3698
FMR Corp. 1,040,200 5.3%(2)
82 Devonshire Street
Boston, Massachusetts 02109
Zesiger Capital Group LLC 1,009,700 5.2%(3)
320 Park Avenue, 30th Floor
New York, New York 10022
</TABLE>
- ---------------
1. According to a Schedule 13G filed by Neuberger & Berman, LLC ("N&B") on
February 10, 1997, N&B has sole voting power with respect to 1,036,300
shares of Common Stock, shared voting power with respect to 512,800 shares
of Common Stock and shared dispositive power with respect to 1,992,200
shares of Common Stock. In the Schedule 13G, N&B reported that it acts as an
investment manager for various funds which hold the shares in the ordinary
course of its business, that it does not have any economic interest in the
shares, that the actual owners of such shares are its clients and its
clients have the sole right to receive and the power to direct the receipt
of dividends or proceeds for the sale of the shares.
2. According to a Schedule 13G filed by FMR Corp. with the SEC on February 14,
1997, FMR Corp. has sole voting power with respect to 693,300 shares of
Common Stock and sole dispositive power with respect to 1,040,200 shares of
Common Stock.
3. According to a Schedule 13G filed by Zesiger Capital Group LLC ("Zesiger")
with the SEC on January 10, 1997, Zesiger has sole voting power with respect
to 849,000 shares of Common Stock, and sole dispositive power with respect
to 1,009,700 shares of Common Stock. In the Schedule 13G, Zesiger stated
that such shares of Common Stock are held in discretionary accounts managed
by Zesiger. Zesiger disclaimed beneficial ownership of such shares.
COMPENSATION AND NOMINATING COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation and Nominating Committee has responsibility for Aviall's
executive compensation practices and policies. The Committee is composed of
three outside directors who are not officers or employees of Aviall or its
subsidiaries and who are not eligible to participate in the Compensation plans
or programs administered by the Committee.
EXECUTIVE PAY POLICY
The Company's compensation programs are intended to attract, retain and
motivate the key people necessary to lead Aviall to achieve its strategic
objective of increased stockholder value over the long term, reflecting the
Committee's belief that executive compensation should seek to align the
interests of Aviall's executives with those of its stockholders. The program
utilizes three components: base salary, short-term incentives and long-term
compensation in the form of both stock options and restricted stock grants.
Following the sale of the Company's engine services, accessories and
fastener businesses and the resulting significant reorganization and downsizing
of the Company's corporate staff in 1996, the Committee undertook a review of
Aviall's executive compensation program, including compensation for the
Company's chief executive officer as well as Aviall's other executive officers.
The Committee believes that its current mix of a base salary and significant
performance-based compensation for the Company's executive officers, which can
be earned by those executives as a result of the achievement of specific
objectives, will increase long-term stockholder value.
8
<PAGE> 12
BASE SALARY
On December 20, 1995, the Board elected Robert G. Lambert, Aviall's
Chairman of the Board, to the additional positions of President and Chief
Executive Officer of Aviall, succeeding Marshall B. Taylor. At the
recommendation of the Committee, the Board set Mr. Lambert's annual base salary
at $100,000.
During 1996, the Board approved increases in the base salaries of certain
executive officers to reflect the new responsibilities undertaken by those
executive officers following the management reorganization in late 1995 and
1996. On December 9, 1996, Mr. Lambert retired as Chief Executive Officer of the
Company, although he remained as Chairman of the Board, and the Board elected
Eric E. Anderson to the position of Chief Executive Officer. In connection with
his promotion and at the recommendation of the Committee, the Board increased
Mr. Anderson's annual base salary to $200,000.
SHORT-TERM INCENTIVE PROGRAM
In December 1995, the Board determined to sell the Company's commercial
engine services and accessories businesses, to use the anticipated proceeds from
those sales to substantially reduce debt and to refocus the Company's operations
on its parts distribution and information services business. The Committee
modified the incentive program for 1996 to link executives' bonus opportunities
to the Company's achievement of specific objectives relating to its proposed
reorganization. Under the 1996 program, bonus awards could be earned for the
achievement of objectives established for each executive relating to the
executive's role in accomplishing this reorganization.
For Mr. Lambert these objectives included achieving earnings levels for the
continuing business, restructuring the Company's existing bank debt, selling the
engine services, accessories and fastener businesses and reorganizing the
Company's senior management team. Based upon his accomplishment of these
objectives during 1996, in December 1996 the Board awarded Mr. Lambert options
to purchase 75,000 shares of Common Stock. The exercise price of those options
was the fair market value of the Common Stock on the date of grant.
The individual objectives for Mr. Anderson included achieving earnings
levels for the continuing business and reorganizing the Company's management
team. Based on the Committee's assessment of his successful accomplishment of
these objectives, Mr. Anderson was awarded an incentive award of $247,716 in
March 1997.
Under the 1997 short-term incentive program, Mr. Anderson and Aviall's
other executive officers will be eligible to receive an aggregate cash bonus
award of up to 100% of his or her base salary based on the Company (or the
executive's business unit) meeting specific earnings objectives. Additionally,
Mr. Anderson and each other executive officer is eligible to receive a
restricted stock award for achieving specific earnings objectives for 1997 above
the earnings objectives for which cash incentive payments may be earned. Mr.
Anderson has the ability to earn a restricted stock award of up to 10,000 shares
of Common Stock. Any earned restricted stock award will be granted in the first
quarter of 1998, will vest at the end of a three-year period commencing from the
grant date, and will otherwise be subject to the terms of the Aviall, Inc. Stock
Incentive Plan.
STOCK OPTIONS
The Stock Incentive Plan is administered by the Board and the Committee and
is designed to provide incentive compensation to Aviall's executive officers and
other key management personnel. The grants are long-term incentives for future
performance, which is designed to align the interests of management with those
of Aviall's stockholders.
At its March 1996 meeting, the Committee approved grants of stock options
to certain executive officers and key employees pursuant to the Stock Incentive
Plan, including a grant to Mr. Lambert of options to purchase 75,000 shares. The
number of options granted to specific individuals was dependent on the
individual's current performance potential for promotion and expected impact on
the future performance of Aviall. For Mr. Lambert and the more senior executive
officers, one half of the grants were made at fair market value at the time of
grant and the other one half of the grants were made at 120% of fair market
value. For the remaining recipients, the grants were made at fair market value
at the time of grant. One third of these options vest each year commencing on
the first anniversary of the grant.
In December 1996, the Committee also approved a grant of 200,000 stock
options to Mr. Anderson in connection with his promotion to chief executive
officer. The option grant to Mr. Anderson was at four different
9
<PAGE> 13
prices: options to purchase 50,000 shares at fair market value at the time of
grant; options to purchase 50,000 shares at 122% of fair market value at the
time of grant; options to purchase 50,000 shares at 143% of fair market value at
the time of grant; and options to purchase 50,000 shares at 163% over fair
market value at the time of grant. One fourth of these options vest each year
commencing on the second anniversary of the grant.
STOCK OWNERSHIP
At the recommendation of the Committee in 1993, the Board approved
voluntary executive stock ownership guidelines for Aviall's chief executive
officer, executive officers and certain other executives. The guidelines are
intended to encourage executives to become substantial stockholders. Under the
guidelines, Aviall's chief executive officer is expected to own shares of Common
Stock with an aggregate value of three times his or her then-current base salary
within five years of appointment to such position. Within such time period, all
other executive officers are expected to own shares of common stock with a value
of 1.5 times their base salary and the remaining executives are expected to own
shares having a value of one-half times their annual base salary. The Committee
periodically reviews the progress of Mr. Anderson and the other executives of
the Company against these guidelines.
The Committee has reviewed the potential impact of the $1 million deduction
limitation on executive compensation for the top five executives which was
implemented as part of the Omnibus Budget Reconciliation act of 1993. The
Committee currently believes that no action is necessary at this time. The
Compensation Committee intends to continue to evaluate Aviall's potential
exposure to the deduction limitation on an annual basis.
This report is submitted by the members of the Compensation and Nominating
Committee of the Board.
THE COMPENSATION AND NOMINATING COMMITTEE OF THE BOARD
<TABLE>
<CAPTION>
<C> <C> <C>
Henry A. McKinnell Donald R. Muzyka Henry Wendt
Chairman
</TABLE>
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation paid
or accrued for the benefit of the named executive officers for services rendered
to Aviall during Aviall's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -----------------
OTHER ANNUAL SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SARS(2) COMPENSATION(3)
--------------------------- ---- -------- -------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric E. Anderson(4) 1996 $174,904 $247,716 $ 0 250,000 $ 31,088
President and Chief 1995 125,000 148,130 1,197 0 400
Executive Officer 1994 121,635 87,650 1,197 16,250 400
Robert G. Lambert(4) 1996 98,077 0 0 150,000 0
Chairman of the Board and 1995 0 0 45,623 0 0
Former President and
Chief Executive Officer
Jacqueline K. Collier 1996 116,800 113,134 0 10,000 400
Vice President, Accounting, 1995 112,354 19,800 0 0 400
and Controller 1994 114,661 21,750 0 4,125 400
Charles M. Kienzle 1996 171,346 233,019 0 25,000 400
Senior Vice President, 1995 125,000 50,000 1,197 0 400
Operations 1994 123,700 18,580 1,197 13,750 400
Bruce Langsen 1996 113,800 156,498 0 18,000 400
President of ILS
Jeffrey J. Murphy 1996 177,000 253,110 0 25,000 511
Senior Vice President, 1995 177,000 70,800 2,395 0 500
Law and Human Resources, 1994 170,327 26,050 2,395 13,750 19,181
Secretary and General Counsel
Mina Brown(5) 1996 85,000 255,000 2,863 0 174,929
Former Senior Vice President, 1995 170,000 68,000 1,197 0 51,638
Chief Financial Officer 1994 166,667 24,990 1,197 12,500 400
R. Frank Leftwich(5) 1996 88,333 150,000 89,208 0 190,538
Former Executive Vice 1995 198,000 79,220 219,226 0 17,067
President, Sales and Marketing 1994 188,000 24,440 2,994 11,250 400
</TABLE>
- ---------------
1. This column includes (a) amounts reimbursed for the payment of income taxes
on certain perquisites provided to the named executive officers, (b) for Mr.
Lambert in 1995, director's fees of $38,249 and $7,374 for the use of an
automobile (see "Compensation of Directors" for a description of certain
other non-cash compensation received by Mr. Lambert in his capacity as a
non-employee director in 1995), and (c) for Mr. Leftwich in 1996, a foreign
housing and living allowance of $83,627 and reimbursement of foreign income
taxes in the amount of $5,581 and in 1995, a foreign housing and living
allowance of $186,761 and reimbursement of foreign income taxes of $29,427.
Other perquisites and personal benefits furnished to the named executive
officers do not meet the disclosure thresholds established under SEC
regulations and are not included in this column.
2. Grants of stock options in 1996 vest at annual percentages of 33% or 25%
beginning on either the first or second anniversary of the date of grant
except with respect to options granted to Mr. Lambert to purchase 75,000
shares of Common Stock, which options vested on the date of grant. Grant of
stock options in 1994 vest one third each year beginning on the first
anniversary of the date of the grant. Each named executive officer who
received a grant of stock options received a number of limited SARs equal to
the number of shares of Common Stock subject to such stock option. The
numbers given reflect an option granted in tandem with a limited SAR as a
single unit.
3. For 1996, this column includes (a) contributions to Aviall's 401(k) Plan in
the amount of $400 for each named executive officer with the exception of
Mr. Lambert who did not participate in such plan, (b) for Mr. Anderson,
moving expenses and a transfer allowance in the amount of $30,688, (c) for
Mr. Murphy, premiums for compensatory split-dollar insurance payments in the
amount of $111, (d) for Ms. Brown, a $17,765 cash payment in lieu of accrued
vacation and payments in the amount of $156,764 under the terms of her
severance agreement, and (e) for Mr. Leftwich, payments in the amount of
$190,138 under the terms of his severance agreement.
4. Mr. Lambert was appointed President and Chief Executive Officer of Aviall in
December 1995. Mr. Anderson succeeded Mr. Lambert as President in June 1996
and as Chief Executive Officer in December 1996.
5. Ms. Brown and Mr. Leftwich resigned as executive officers of Aviall in 1996.
11
<PAGE> 15
SEVERANCE AGREEMENTS
Aviall is a party to severance agreements with each of Eric E. Anderson,
Jacqueline K. Collier, Charles M. Kienzle and Jeffrey J. Murphy, among other key
executive officers. Neither Robert G. Lambert nor Bruce Langsen is a party to a
severance agreement with Aviall. The Company is also a party to such severance
agreements with two former executive officers, Mina Brown and R. Frank Leftwich.
The severance agreements provide that if Aviall or one of its subsidiaries,
as the case may be, terminates the employment of any such executive for reasons
other than death, disability or cause or, if within the three-year period
commencing with a change of control of Aviall, the executive terminates
employment with Aviall for good reason, Aviall will provide the executive with a
multiple of salary and bonus ranging from a maximum of two times salary and one
times bonus for the highest level executive to a minimum of one-half times
salary and, for each year of service, one month bonus (subject to a maximum of
12 months bonus) for lower level executives, as well as various benefits and
perquisites, net of excise taxes.
CERTAIN TRANSACTIONS
In connection with his promotion as Chief Executive Officer of the Company,
Mr. Anderson transferred from Memphis, Tennessee to Dallas, Texas. On December
16, 1996, the Company made Mr. Anderson a secured, non-interest bearing loan in
the amount of $140,000 for the purchase of a home in Dallas, pending the sale of
his former residence. Mr. Anderson repaid the loan in full on January 31, 1997.
OPTION/SAR GRANTS IN 1996
The following table provides information regarding the grant of stock
options to the named executive officers in 1996. In addition, hypothetical gains
of 5% and 10%, along with a third column representing a 0% gain (listed in the
table under "Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Option Term"), are shown for these stock options. These
hypothetical gains are based on assumed rate of annual compound stock price
appreciation of 0%, 5% and 10% from the date the stock options were granted over
the full option term of ten years.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES PRICE PER EXPIRATION
NAME GRANTED(1) IN 1996 SHARE(2) DATE
---- ---------- --------------- --------- ----------------
<S> <C> <C> <C> <C>
Eric E. Anderson 25,000 4.69% $ 8.13 March 14, 2006
25,000 4.69 9.75 March 14, 2006
50,000 9.38 9.81 December 8, 2006
50,000 9.38 12.00 December 8, 2006
50,000 9.38 14.00 December 8, 2006
50,000 9.38 16.00 December 8, 2006
Robert G. Lambert 37,500 7.04 8.13 March 14, 2006
37,500 7.04 9.75 March 14, 2006
75,000 14.08 9.81 December 8, 2006
Jacqueline K. Collier 10,000 1.87 8.13 March 14, 2006
Charles M. Kienzle 25,000 4.69 9.44 June 9, 2006
Bruce Langsen 18,000 3.38 8.13 March 14, 2006
Jeffrey J. Murphy 12,500 2.34 8.13 March 14, 2006
12,500 2.34 9.75 March 14, 2006
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
FOR OPTION TERM
--------------------------------------
NAME 0% 5% 10%
---- ------------ -------- ----------
<S> <C> <C> <C>
Eric E. Anderson $ 0 $127,744 $ 323,729
0 87,119 283,104
0 308,551 781,930
0 199,176 672,555
0 99,176 572,555
0 0 472,555
Robert G. Lambert 0 191,616 485,593
0 130,679 424,658
0 462,827 1,172,895
Jacqueline K. Collier 0 51,098 129,492
Charles M. Kienzle 0 148,380 376,024
Bruce Langsen 0 91,976 233,085
Jeffrey J. Murphy 0 63,872 161,864
0 43,560 141,552
</TABLE>
- ---------------
1. Each option was granted in tandem with a limited SAR. Each of the options
shown in the table above (other than the grants made to Messrs. Anderson and
Lambert that expire on December 8, 2006) vest one third each year, beginning
on the first anniversary of the date of the grant. The options granted to
Mr. Lambert that expire on December 8, 2006 were fully vested on the date of
the grant. The options granted to Mr. Anderson that expire on December 8,
2006 vest 25% each year, beginning on the second anniversary of the date of
the grant. No options or SARs were granted to Ms. Brown or Mr. Leftwich in
1996.
2. The fair market value of the shares using the average of the high and low
trading prices on the date of grant except that (i) the grants made to
Messrs. Anderson, Lambert and Murphy with an exercise price of $9.75 per
share represented 120% of the fair market value on the date of grant, and
(ii) the grants made to Mr. Anderson at $12.00, $14.00 and $16.00 per share
represented 122%, 143% and 163% of fair market value on the date of grant.
12
<PAGE> 16
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND DECEMBER 31, 1996 OPTION/SAR VALUES
The following table provides information, for each of the named executive
officers, regarding the exercise of Aviall options during 1996 and unexercised
options held as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT DECEMBER 31, 1996(1) DECEMBER 31, 1996(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric E. Anderson 0 $ 0 37,491 268,025 $14,746 $34,159
Robert G. Lambert 0 0 75,000 75,000 0 39,843
Jacqueline K. Collier 0 0 14,786 17,653 3,742 12,554
Charles M. Kienzle 0 0 44,874 42,175 12,478 6,428
Bruce Langsen 0 0 7,800 21,040 3,575 20,967
Jeffrey J. Murphy 0 0 106,201 42,175 40,970 19,709
Mina Brown 12,500 28,125 63,962 0 0 0
R. Frank Leftwich 0 0 69,133 16,325 10,209 5,259
</TABLE>
- ---------------
1. The number of unexercised options includes shares of Common Stock that may
be issued upon the exercise of replacement options that were granted in
December 1993 pursuant to an agreement entered into by Ryder System, Inc.
("Ryder") and Aviall in connection with the distribution by Ryder (the
"Spin-Off") of all of Aviall's Common Stock to the stockholders of Ryder
(which agreement was approved by the Board prior to the Spin-Off, at which
time a majority of Aviall's directors were executive officers of Ryder). The
number of Aviall options that were granted to replace the Ryder options was
determined by reference to the market value of Ryder's shares and Aviall's
Common Stock in order to preserve the economic value of the optionee's Ryder
options. Each replacement option has the same vesting status and remaining
time period for exercise as the corresponding Ryder options.
2. Amounts reflecting gains or outstanding stock options were based on a price
of $9.19 per share of Aviall's Common Stock, using the average of the high
and low trading prices on December 31, 1996.
13
<PAGE> 17
RETIREMENT BENEFITS
Aviall and certain of its subsidiaries maintain certain pension plans in
which Aviall's executive officers participate.
Aviall covers substantially all regular full-time employees who are not
covered by plans administered by labor unions under the Aviall, Inc. Retirement
Plan ("Retirement Plan"). Benefits payable under the Retirement Plan are based
on an employee's career earnings with Aviall and its subsidiaries. At normal
retirement age of 65, a participant is entitled to a monthly pension benefit
payable for life. The annual pension benefit, when paid in the form of a life
annuity with no survivor's benefits, is generally equal to the sum of 1.45% of
the first $15,600 of compensation and bonus received, plus 1.85% of the portion
of such compensation and bonus in excess of $15,600 during each such year while
a Retirement Plan member.
Retirement Plan benefits vest at the earlier of the completion of five
years of credited service or upon reaching age 65; provided, however, that in
the event of a change of control of Aviall, all participants will be fully
vested and the term "accrued benefit" will include the value of early retirement
benefits for any participant age 45 or above or with 10 or more years of
service. These benefits are not subject to any reduction for Social Security
benefits or other offset amounts. An employee's pension benefits may be paid in
certain alternative forms having actuarially equivalent values.
The maximum annual benefit under a qualified pension plan is currently
$120,000 beginning at the Social Security retirement age (currently age 65). The
maximum compensation and bonus that may be taken into account in determining
annual retirement accruals is currently $150,000. Aviall maintains a
non-qualified, unfunded benefit plan, called the Benefit Restoration Plan (the
"Restoration Plan"), which covers those participants of the Retirement Plan,
including those described below, whose benefits are reduced by the Internal
Revenue Code or other United States laws. A participant in the Restoration Plan
is entitled to a benefit equaling the difference between the amount of benefits
the participant is entitled to without reduction and the amount of benefits the
participant is entitled to after the reductions.
Except as described below, the following table sets forth estimated annual
pension benefits (in the form of a single life annuity) assuming each named
executive officer remains continuously employed at current compensation levels
until retirement at the normal retirement date (age 65).
<TABLE>
<CAPTION>
NAME AMOUNT(1)
---- ---------
<S> <C>
Eric E. Anderson............................................ $69,037
Robert G. Lambert(2)........................................ 1,752
Jacqueline K. Collier....................................... 53,131
Charles M. Kienzle.......................................... 74,647
Bruce Langsen............................................... 40,242
Jeffrey J. Murphy........................................... 62,865
Mina Brown(2)............................................... 17,251
R. Frank Leftwich(2)........................................ 31,311
</TABLE>
- ---------------
1. These amounts include benefits under the Retirement Plan and the Restoration
Plan combined.
2. Mr. Lambert retired as Chief Executive Officer of Aviall in December 1996.
Ms. Brown and Mr. Leftwich resigned as executive officers of the Company in
July 1996 and June 1996, respectively. The amounts shown in the table above
represents the estimated pension benefits (in the form of a single life
annuity) for such individuals through the date of their retirement or
resignation.
14
<PAGE> 18
STOCK PERFORMANCE
The following graph compares the cumulative stockholder return on Aviall's
Common Stock with the S&P 500 Stock Index, the S&P SmallCap Aerospace/Defense
Index and the Dow Jones Industrial Commercial Services Index. The comparison
assumes $100 was invested as of December 1, 1993 (the date on which shares of
Common Stock began trading on a "when issued" basis) and the reinvestment of all
dividends.
COMPARISON OF CUMULATIVE STOCKHOLDER RETURN
<TABLE>
<CAPTION>
DOW JONES
S&P INDUSTRIAL
MEASUREMENT PERIOD SMALLCAP COMMERCIAL
(FISCAL YEAR COVERED) AVIALL, INC S&P 500 AEROSPACE/DEFENSE SERVICES
<S> <C> <C> <C> <C>
1-DEC-93 100 100 100 100
31-DEC-93 101.67 101.21 106.91 102.10
31-DEC-94 51.04 102.55 104.65 100.83
31-DEC-95 63.07 141.08 119.02 128.12
31-DEC-96 62.22 173.47 169.79 144.56
</TABLE>
For the last three years, the Company has compared its stockholder return
to the Dow Jones Industrial Commercial Services Index. In 1996, the Company sold
its commercial engine services businesses and refocused its operations on its
parts distribution and information services business. Accordingly, the Company
is changing its comparison from the Dow Jones Industrial Commercial Services
Index to the S&P SmallCap Aerospace/Defense Index, on the basis that the S&P
SmallCap Aerospace/Defense Index provides a more appropriate measure of
performance of the Company's Common Stock. The Dow Jones Industrial Commercial
Services Index is included in the chart above this year in accordance with SEC
regulations.
15
<PAGE> 19
AMENDMENT TO THE AVIALL, INC. DIRECTORS STOCK PLAN
(PROPOSAL NO. 2)
INTRODUCTION
Since becoming a public company in December 1993, Aviall has maintained the
Aviall, Inc. Directors Stock Plan (the "Directors Stock Plan") which permits
non-employee Directors to elect to receive shares of Common Stock in lieu of a
portion of the cash annual retainer (the "Annual Retainer") they are otherwise
entitled to receive for their services as members of the Board of Directors of
the Company. In December 1996, the Board approved an amendment to the Directors
Stock Plan (as amended, the "Restated Directors Stock Plan"). The amendment
would permit non-employee Directors to elect to receive shares of Common Stock
in lieu of the full amount of the Annual Retainer, increase the number of shares
available for issuance under the Directors Stock Plan from 37,500 to 87,500 and
make certain other changes to conform the Directors Stock Plan to recent
amendments to certain SEC regulations and current practice. The amendment will
become effective only upon approval by the Company's stockholders.
The Restated Directors Stock Plan is intended to enable the Company to
attract and retain persons of outstanding competence to serve as members of the
Board and to provide a direct link between Directors' compensation and
stockholder value. The Restated Directors Stock Plan is designed to further
facilitate the ownership of Common Stock by non-employee Directors by permitting
such Directors to elect to receive the full amount of the Annual Retainer in
shares of Common Stock.
The following is a summary of the material provisions of the Restated
Directors Stock Plan. The summary is qualified in its entirety by reference to
the full text of the Restated Directors Stock Plan, a copy of which is attached
to this Proxy Statement as Annex A.
ADMINISTRATION AND ELIGIBILITY
The Restated Directors Stock Plan will be administered by the Board of
Directors of the Company or by a committee designated by the Board. Pursuant to
the terms of the Restated Directors Stock Plan, only non-employee Directors of
Aviall are eligible to participate in the Restated Directors Stock Plan. A
Director who is an employee of Aviall and who retires or resigns from employment
with Aviall and/or any of its subsidiaries, but remains a Director of Aviall,
will become eligible to participate in the Restated Directors Stock Plan at the
time of such termination of employment.
Under the Restated Directors Stock Plan, any eligible Director may make an
election to receive shares of Common Stock in lieu of the Annual Retainer, which
will be increased to $24,375, subject to approval of the proposed amendment to
the Directors Stock Plan. See "Compensation of Directors." The Restated
Directors Stock Plan provides that the number of shares of Common Stock granted
to a participant will be equal to the nearest number of whole shares of Common
Stock which can be purchased for $30,000 (the "Share Value") based on the mean
of the highest and lowest sale price for the Common Stock on the grant date as
reported on the New York Stock Exchange Composite Transaction Reporting System.
The Restated Directors Stock Plan provides that in the event of an increase or a
decrease in the Annual Retainer, the Share Value adjusts automatically so that
the ratio between the Annual Retainer and the Share Value is maintained.
PARTICIPATION
Under the Restated Directors Stock Plan, grants of Common Stock will be
made automatically on the first business day in July of each calendar year to
any eligible Director who has filed with Aviall an election to participate in
the Restated Directors Stock Plan at least six months prior to that date. As a
result, eligible Directors will be permitted to make an annual election to
participate in the Restated Directors Stock Plan. Four directors (Messrs.
Lambert, McKinnell, Muzyka and Wendt) will be eligible to participate in the
Restated Directors Stock Plan, if the amendment is approved by the Company's
stockholders. For 1997, all eligible Directors have elected to participate in
the Restated Directors Stock Plan if the proposed amendment is approved by the
Company's stockholders. All such Directors will participate in the Directors
Stock Plan if the amendment is not so approved.
A Director who receives a grant of Common Stock pursuant to the Restated
Directors Stock Plan is entitled to receive dividends on and to vote such
shares. However, the Director's ownership rights in such shares do not
16
<PAGE> 20
vest until six months after the date of grant and then only if the Director
continuously serves in that capacity through that date. However, a participating
Director who has completed a full term of service prior to the end of such
six-month period, or whose service during such six-month period was interrupted
due to death or disability, will be vested in a pro rata number of such shares.
Pursuant to the terms of the Restated Directors Stock Plan, none of the shares
of Common Stock issued thereunder may be sold or transferred prior to six months
after the date when the participating Director's service as a Director of the
Company ceases. Certificates representing shares of Common Stock granted to
Directors pursuant to the Restated Directors Stock Plan will be held in escrow
by Aviall's Secretary or by another agent designated by Aviall. The certificates
are released from escrow and delivered to the Director six months after the date
the Director ceases serving on the Board.
AMENDMENT AND TERMINATION
The Board may suspend or terminate the Restated Directors Stock Plan at any
time. In addition, the Board may, from time to time, amend the Restated
Directors Stock Plan in any manner but may not, without stockholder approval,
adopt any amendment that would increase the total number of shares of Common
Stock that may be granted under the Restated Directors Stock Plan (other than as
the result of an adjustment for any stock split, stock dividend or similar
event). The termination or any modification or amendment of the Restated
Directors Stock Plan will not, without the consent of any participant involved,
adversely affect rights under a previous grant of Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax laws, stock grants under the Restated
Directors Stock Plan will generally have the following consequences. The
Director will not recognize income for federal income tax purposes at the time
of grant. Instead, the Director will be taxed on the fair market value of the
shares of Common Stock on the date of vesting. Aviall will be entitled to a
corresponding deduction when the Director recognizes income. As an alternative,
the Director may make an irrevocable election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, to recognize income and be taxed on
the fair market value of the shares of Common Stock on the date of grant. Such
an election will accelerate Aviall's deduction as well. If the Director makes
this election, and the Common Stock is forfeited prior to vesting, no deduction
or loss is allowed to the director as a result of the forfeiture. The election
must be made not later than 30 days after the date of grant. The Director's
holding period for the Common Stock will begin on the date the Director
recognizes income under the Restated Directors Stock Plan.
ADDITIONAL INFORMATION
There are 37,500 shares of Common Stock presently authorized for issuance
under the Directors Stock Plan of which 19,299 shares of Common Stock have been
issued. If the amendment to the Directors Stock Plan is approved by the
Company's stockholders, 68,201 shares of Common Stock would be available to be
issued under the Restated Directors Stock Plan, subject to adjustment by the
Board in the event of any stock split, stock dividend, merger or similar event.
The closing price of the Company's Common Stock on April 16, 1997, as
reported on the New York Stock Exchange Composite Transaction Reporting System
was $11.00.
THE BOARD RECOMMENDS A VOTE FOR APPROVING THE AMENDMENT TO THE DIRECTORS
STOCK PLAN.
17
<PAGE> 21
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
On March 19, 1997, upon recommendation of the Audit Committee, the Board
unanimously selected, subject to ratification by Aviall's stockholders, Price
Waterhouse LLP to continue to serve as independent auditors for Aviall and its
subsidiaries for the fiscal year ending December 31, 1997. Price Waterhouse LLP
first served as Aviall's independent auditors beginning in 1994.
Aviall has been advised that representatives of Price Waterhouse LLP will
be present at the Annual Meeting with the opportunity to make statements and to
respond to appropriate questions raised at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF PRICE
WATERHOUSE LLP AS INDEPENDENT AUDITORS.
COST OF SOLICITATION
The cost of solicitation of proxies, including expenses in connection with
the preparation and mailing of this Proxy Statement, will be borne by Aviall.
Aviall has retained D.F. King & Co., Inc. to aid in the solicitation of proxies.
For their services, D.F. King & Co., Inc. will receive a fee estimated at $6,500
plus reimbursement of reasonable out-of-pocket expenses. Aviall does not
otherwise expect to pay any compensation for the solicitation of proxies, but
will reimburse brokers and nominees for their reasonable expenses for sending
proxy material to principals and obtaining their proxies. In addition to
solicitation by mail, directors, officers and employees of Aviall may solicit
proxies in person, by telephone or by other means of communication.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR
AVIALL'S 1998 ANNUAL MEETING OF STOCKHOLDERS
Pursuant to SEC regulations, in order to be included in Aviall's Proxy
Statement for Aviall's 1998 Annual Meeting of Stockholders, stockholder
proposals must be received at the principal office of Aviall, 2075 Diplomat
Drive, Dallas, Texas 75234-8989, Attention: Secretary, no later than December
26, 1997, as well as meet all other SEC requirements. In addition, Aviall's
By-Laws provide that any stockholder who desires either to bring a stockholder
proposal before an annual meeting or to present a nomination for director at an
annual meeting of stockholders must give advance notice to Aviall's Secretary
regarding the proposal or nominee. The By-Laws generally require that written
notice be delivered to the Secretary of Aviall not less than 70 days nor more
than 90 days prior to the anniversary of the preceding year's annual meeting of
stockholders and contain certain information regarding the stockholder desiring
to present a proposal or make a nomination and, in the case of a nomination,
information regarding the proposed director nominee. A copy of the By-Laws is
available upon request from the Secretary of Aviall.
AVIALL, INC.
/s/ JEFFREY J. MURPHY
Jeffrey J. Murphy
Senior Vice President, Law and Human
Resources, Secretary and General
Counsel
Dallas, Texas
April 25, 1997
18
<PAGE> 22
ANNEX A
AVIALL, INC.
AMENDED AND RESTATED
DIRECTORS STOCK PLAN
SECTION I
PURPOSES OF THE PLAN
The Aviall, Inc. Amended and Restated Directors Stock Plan (the "Plan") is
intended to enable Aviall, Inc. (the "Company") to attract and retain persons of
outstanding competence to serve as members of the Board of Directors of the
Company and to provide a direct link between Directors' compensation and
stockholder value.
SECTION II
ADMINISTRATION OF THE PLAN
A. Board -- The Plan shall be administered by the Board of Directors of the
Company or a duly authorized committee thereof (the Board of Directors of the
Company or any such committee being hereinafter referred to as the "Board").
Grants of stock to eligible participants under the Plan and the amount, nature
and timing of the grants shall be determined as set forth in Sections IV and V.
B. Authority of the Board -- Subject to the limitations and restrictions
set forth in the Plan, the Board shall have full and final authority to
interpret the Plan; to prescribe, amend and rescind rules and regulations, if
any, relating to the Plan; and to make all determinations necessary or advisable
for the administration of the Plan. No member of the Board shall be liable for
anything done or omitted to be done by him or by any other member of the Board
in connection with the Plan, except for his own willful misconduct or gross
negligence. All decisions which are made by the Board with respect to
interpretation of the terms of the Plan and with respect to any questions or
disputes arising under the Plan shall be final and binding on the Company and
the participants, their heirs or beneficiaries.
C. Acts of the Board -- A majority of the Board will constitute a quorum
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all members of the Board
without a meeting, will be the acts of the Board.
SECTION III
STOCK SUBJECT TO THE PLAN
A. Common Stock -- The stock which is the subject of grants under the Plan
shall be the Company's Common Stock, par value $.01 per share ("Common Stock"),
which shares shall be subject to the terms, conditions and restrictions
described in the Plan.
B. Maximum Number of Shares That May Be Granted -- There may be granted
under the Plan an aggregate of not more than eighty-seven thousand five hundred
(87,500) shares of Common Stock, subject to adjustment as provided in Section
VII hereof. Shares of Common Stock granted pursuant to the Plan may be either
authorized, but unissued, shares or reacquired shares, or both.
C. Rights With Respect To Shares -- A Director to whom a grant of Common
Stock has been made shall have absolute beneficial ownership of the shares of
Common Stock granted to that Director, including the right to vote the shares
and to receive dividends thereunder; subject, however, to the terms, conditions
and restrictions described in the Plan, including, but not limited to, under
Section V. The certificate(s) for such shares shall be held by the Company (or
by an agent designated by the Secretary of the Company) for the Director's
benefit until the terms, conditions and restrictions lapse, whereupon the
certificates shall be delivered to the Director.
<PAGE> 23
SECTION IV
PARTICIPATION
A. Directors -- Participation in the Plan shall be limited to persons who
serve as members of the Board of Directors of the Company and who, at the time
of grant, are not "employees" of the Company and/or any of its subsidiaries,
within the meaning of the Employee Retirement Income Security Act of 1974
("ERISA"). A Director who is an employee and who retires or resigns from
employment with the Company and/or any of its subsidiaries, but remains a
Director of the Company, shall become eligible to participate in the Plan at the
time of such termination of employment.
B. Elections -- Any eligible Director may elect to participate in the Plan
and receive grants of Common Stock as set out in Paragraph C of this Section IV
by delivering to the Committee a written notice to such effect. Any such
election shall remain in effect until revoked by the participating Director by
delivering to the Board a written notice to such effect. An election shall be
made at least six (6) months prior to the Grant Date (as defined below), and
according to procedures established by the Board.
C. Grants -- Each participating Director who has made an election to
participate in the Plan pursuant to Paragraph B of this Section IV shall be
eligible to receive annually, on the first New York Stock Exchange trading day
in July of each calendar year (the "Grant Date"), following such election, in
lieu of such Director's annual retainer for service as a director of the Company
(the "Annual Retainer") a grant of Common Stock. The number of shares of Common
Stock that shall be granted to participating Director will be the number of
whole shares which can be purchased for Thirty Thousand Dollars ($30,000.00)
(the "Share Value") based on the Fair Market Value of the shares on the Grant
Date. Fractional shares shall not be granted. "Fair Market Value" will be the
mean of the highest and lowest sale price for the Common Stock as reported on
the New York Stock Exchange Composite Transaction Reporting System on the Grant
Date.
D. Adjustment of Share Value -- In the event that there shall be an
increase or decrease in the Annual Retainer, the Share Value shall adjust
automatically so that the ratio between the Annual Retainer and the Share Value
is maintained.
SECTION V
TERMS AND CONDITIONS OF STOCK GRANTS
A. Vesting -- Each grant of Common Stock to a participating Director in
accordance with the Plan shall be vested on the six-month anniversary of the
Grant Date, so long as the Director has served continuously as a director of the
Company during the intervening six-month period; provided, however, that a
participating Director who leaves the Board of Directors of the Company
following the completion of the term of service for which the Director was
elected prior to the end of such six-month period or whose service during such
six-month period was interrupted due to death or disability shall be vested in a
pro rata number of such shares. Except as described in the preceding sentence,
in the event a Director's service to the Company terminates before the shares
have vested, then all shares granted to such Director which have not vested
shall be cancelled and such shares shall be forfeited and retransferred to the
Company, with the Director having no further right or interest in such forfeited
and retransferred shares.
B. Restrictions on Transfer -- Shares of Common Stock granted to a
participating Director may not be assigned, transferred, pledged, hypothecated
or otherwise disposed of (i) before they have vested in accordance with
Paragraph A of this Section V and (ii) until six (6) months after the
termination of the Director's service to the Company as a director.
A-2
<PAGE> 24
SECTION VI
COMPLIANCE WITH LAW AND OTHER CONDITIONS
A. Restrictions Upon Grant Of Common Stock -- The listing upon the New York
Stock Exchange, or any other stock exchange, or the registration or
qualification under any federal or state law of any shares of Common Stock to be
granted pursuant to the Plan may be necessary or desirable as a condition of, or
in connection with, such grant and, in any such event, delivery of the
certificates for such shares of Common Stock shall, if the Board, in its sole
discretion, shall determine, not be made until such listing, registration or
qualification shall have been completed.
B. Restrictions Upon Resale Of Unregistered Stock -- If the issuances of
the shares of Common Stock that have been granted to a participating Director
pursuant to the terms of the Plan are not registered under the Securities Act of
1933, as amended, pursuant to an effective registration statement, such
Director, if the Board shall deem it advisable, may be required to represent and
agree in writing:
(i) that any shares of Common Stock acquired by such Director pursuant
to the Plan will not be sold, except pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or pursuant to an
exemption from registration under such Act, and
(ii) that such Director is acquiring such shares of Common Stock for
his own account and not with a view to the distribution thereof.
SECTION VII
ADJUSTMENT
The number of shares of Common Stock of the Company reserved for grants
under the Plan shall be subject to adjustment by the Board to reflect any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or similar event.
SECTION VIII
MISCELLANEOUS PROVISIONS
A. Nothing in the Plan shall be construed to give any Director of the
Company any right to a grant of Common Stock under the Plan unless all
conditions described within the Plan are met as determined in the sole
discretion of the Board.
B. Neither the Plan, nor the granting of Common Stock nor any other action
taken pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a Director for
any period of time. Nothing in the Plan shall in any manner be construed to
limit in any way the right of the Company or its stockholders to reelect or not
reelect or renominate or not renominate a participating Director.
C. Any shares of Common Stock of the Company issued as a stock dividend, or
as a result of stock splits, combinations, exchanges of shares, reorganizations,
mergers, consolidations or otherwise with respect to shares of Common Stock
granted pursuant to the Plan shall have the same status and be subject to the
same restrictions as the shares granted.
D. The costs and expenses of administering the Plan shall be borne by the
Company and not charged to any grant of Common Stock nor to any participating
Director.
E. The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority, whether
federal, state or local, to withhold in connection with any event or action
under the plan.
A-3
<PAGE> 25
SECTION IX
AMENDMENT
The Board may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner; provided however,
that the Board shall not amend Paragraph B of Section III to increase the total
number of shares of Common Stock that may be granted under the Plan without the
approval of the Company's stockholders. Notwithstanding the foregoing (i) an
adjustment increasing the total number of shares of Common Stock reserved for
grants under the Plan pursuant to Section VII shall not require stockholder
approval, and (ii) the suspension, termination or amendment of the Plan shall
not, without the consent of any participant involved, adversely affect rights
under a previous grant of Common Stock.
SECTION X
GOVERNING LAW
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Texas and construed accordingly.
SECTION XI
APPROVAL BY STOCKHOLDERS
The Plan was approved by the stockholders of the Company on June 13, 1997.
A-4
<PAGE> 26
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders,
you can be sure your shares are represented at the Annual Meeting by promptly
returning your proxy in the enclosed envelope.
DETACH HERE
[X] Please mark
votes as in
this example.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEES AND FOR PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------
1. Election of Directors (See reverse).
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------------------------
For both nominees except as noted above
2. Approval of the amendment to the Aviall, Inc. Directors Stock Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of Price Waterhouse LLP as independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
IMPORTANT: Whether or not you expect to attend the meeting in person, please
date, sign and return this proxy. Please sign exactly as your name appears
hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
Signature: Date Signature: Date
------------------- -------- ------------------ ------
<PAGE> 27
P
R
O
X
Y
DETACH HERE
AVIALL, INC.
PLEASE DATE AND SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
The undersigned acknowledge(s) receipt of the Proxy Statement of
Aviall, Inc. relating to the 1997 Annual Meeting of Stockholders (the "Annual
Meeting") and hereby constitute(s) and appoint(s) Jacqueline K. Collier,
Jeffrey J. Murphy and Cornelius Van Den Handel, attorneys and proxies of the
undersigned, with full power of substitution and resubstitution to each and
with all the powers the undersigned would possess if personally present, to
vote for and in the name and place of the undersigned all shares of Common
Stock of Aviall, Inc. held or owned by the undersigned, or standing in the name
of the undersigned, at the Annual Meeting to be held on Monday, June 13, 1997,
commencing at 10:00 a.m., at the Company's offices located at 2075 Diplomat
Drive in Dallas, Texas, or any adjournment or postponement thereof, upon the
matters referred to in the Proxy Statement for the Annual Meeting as stated
below and on the reverse side. The proxies are further authorized to vote, in
their discretion, upon such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof. A majority of said
attorneys and proxies present and acting at the Annual Meeting (or if only one
shall be present and act, then that one) shall have, and may exercise, all the
powers of all said attorneys and proxies hereunder.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AVIALL, INC. UNLESS OTHERWISE SPECIFIED BELOW OR ON THE REVERSE SIDE, THIS
PROXY WILL BE VOTED FOR THE NOMINEES OF THE BOARD OF DIRECTORS LISTED BELOW,
FOR THE AMENDMENT TO THE DIRECTORS STOCK PLAN AND FOR THE RATIFICATION OF PRICE
WATERHOUSE LLP AS AVIALL, INC.'S INDEPENDENT AUDITORS. DISCRETIONARY AUTHORITY
IS HEREBY CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL
MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF TWO DIRECTORS to serve until Aviall, Inc.'s 2000
Annual Meeting of Stockholders. The nominees are Eric E.
Anderson and Dr. Henry A. McKinnell.
2. AMENDMENT TO THE DIRECTORS STOCK PLAN.
3. RATIFICATION OF THE APPOINTMENT of Price Waterhouse LLP as
independent auditors.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
